China Inflation Surges to 3.2% in February on Holiday Spending

China's inflation has jumped more- than- expected to its highest level in about 10 months in February, helped by increased spending during the week-long New Year holidays.

According to the National Bureau of Statistics, consumer prices in the world's second- largest economy rose 3.2 percent year-on-year during the month. Food prices jumped 6 percent to a nine-month peak.

Separate polls from Reuters and Bloomberg had expected consumer prices to raise 3 and 2 percent respectively.

Prices rose 1.1 percent month-on-month as against the analysts' expectations of a 0.8 percent increase. Producer prices eased 1.6 percent year-on- year, more than expectations of a 1.5 percent fall.

The unprecedented jump in food prices is expected to be due to the seasonal distortions caused by the New Year holidays, which fell in January in 2012 and in February this year.

In a statement accompanying the data, senior NBS statistician Yu Qiumei said that "Going into March, with the Lunar New Year impact fading and weather turning better, all conditions become favourable for food production and transportation and March CPI is expected to ease from February".

If prices continue to increase, authorities may have to seek tighter controls over its monetary policy, which could in turn hurt China's economic expansion plans.

Policy makers have already indicated that inflation could increase over the previous year in 2013, climbing to as much as 3.5 percent from the 2.6 percent in 2012. The country's economy had expanded at its slowest rate in 13 years in 2012.

"Inflation is a policy risk looming large on the horizon," Liu Li-Gang, chief Greater China economist at Australia & New Zealand Banking Group Ltd. in Hong Kong, was quoted by Bloomberg. Liu added that the increasing income, environmental costs and economic growth could fuel prices higher.