A customer buys vegetable at a market in Nanjing, Jiangsu province February 19, 2008. China's consumer price inflation surged to 7.1 percent in January, the highest level in more than 11 years, from 6.5 percent in December, the National Bureau of Statistics said on Tuesday. [Agencies]

China's inflation accelerated in January to 7.1 percent -- its rate highest in a decade -- amid snowstorms that fueled a spike in food costs, according to data reported Tuesday by the National Bureau of Statistics (NBS).

The sharp rise in consumer prices index (CPI) was driven by an 18.2 percent increase in food costs from the same period a year ago, the NBS said on its website.
The figure was as most market analysts expected but slightly lower than Bank of China's forecasts. The bank forecast the CPI for January would jump 7.5 percent or higher.

"The CPI was mainly driven up by factors including the severe snow disaster that ravaged more than half of the country's areas and food price hikes during the Spring Festival," said Yao Jingyuan, the chief economist of the NBS.

China has tried to increase food supplies with steps including paying farmers to raise more pigs.

So far, the rise appears to be confined to food, according to the data released Tuesday.

The bureau said food prices ballooned 18.2 percent in January from a year earlier, grain prices rose 5.7 percent and cooking oil prices increased by 37.1 percent. Pork prices, which had been blamed as the major factor driving up CPI figures throughout the later half of last year, soared 58.8 percent in January, the bureau said.

Non-food prices, however, rose only 1.5 percent, it said. The CPI rose 6.8 percent in urban cities, compared with 7.7 percent in rural areas.

The January's CPI figure was the highest level since 1997. CPI, the main gauge of inflation, once increased by 7.0 percent in December of 1996 and 6.9 percent last November.

Accelerating inflation adds to evidence the world's fastest-growing major economy is at risk of overheating, after the trade surplus rose more than forecast in January and money supply grew at the quickest pace in 20 months. The central bank may refrain from raising interest rates as it assesses weakening US demand for exports and the blizzards' toll on production.

Currency gains and curbs on bank lending may be favored this year as tools to curb inflation. The government has also imposed price controls for food and energy.

China's economy, the world's fourth largest, may grow 10 percent this year, according to the International Monetary Fund, down from 11.4 percent in 2007, as export growth weakens.

The financial system is flooded with cash from record trade surpluses, threatening to stoke inflation that has soared since last year on food and fuel. The surplus jumped 23 percent in January from a year earlier to $19.5 billion. Money supply rose 18.9 percent.

Snowstorms from mid-January closed factories and boosted prices by destroying crops and disrupting deliveries.

Accelerating producer prices show pressure for inflation to stay high. Producer prices, the cost of goods as they leave the factory, jumped 6.1 percent in January, the biggest gain in more than three years, on oil and raw materials.

Economists expect the government to keep raising banks' reserve requirements, a Bloomberg survey last month showed. The central bank has ordered lenders to set aside more deposits as reserves on 11 occasions since the start of last year, pushing the ratio to 15 percent, the highest ever.

Economists are split on whether interest rates will rise this year after six increases in 2007, the survey showed.