Inflation rebounded to 4.5% in January

The consumer price index (CPI), main gauge of inflation in China rebounded in January to 4.5% year on year, against 4.1% in December, the Chinese New Year holidays helped boost the price increase.

Inflation, the major concern of the government, had decreased during the second half of 2010 in the second largest economy, after reaching a peak of 6.5% in July.

Analysts expected that the price increase last month is limited to 4.1%, unchanged from December.

Over a month, prices rose 1.5% in January compared to December, after rising only 0.3% between November and December.

The surge in inflation in January was due in part to celebrate Chinese New Year, which fell this year on January 23.

Inflation is driven by the food prices, which rose 10.5% in January. This increase disproportionately affects the poorest of the population, who spend a larger share of their income on food.

The index of producer prices, a leading indicator of future price increases, for its part, fell to 0.7% over one year and has even declined by 0.1% compared to December.

For all of 2011, inflation rose to 5.4% in China, against 3.3% in 2010.