China's Feb inflation leaps to 11-year high

China's consumer price inflation jumped in February to an 11-year high of 8.7 percent, presenting Beijing's stability-conscious leaders with a big economic headache in the run-up to the Olympic Games.
Inflation in January was 7.1 percent and economists had expected a February figure of 8.0 percent.
"There's growing concern that China's inflation is getting out of control," said Li Huiyong, an analyst at Shenyin & Wanguo Securities in Shanghai.
The Shanghai stock market fell in response to the report as investors priced in higher interest rates. The main index .SSEC ended the morning session down 0.67 percent.
"This means further monetary tightening ahead," said Gao Lingzhi, a strategist at Great Wall Securities in Shenzhen.
"I think the government may raise interest rates further and accelerate yuan appreciation, which would hurt Chinese manufacturers," he said.
Headline inflation is now at the highest level since May 1996.
The National Bureau of Statistics blamed the surprising increase largely on fierce winter weather and seasonal price rises due to the Lunar New Year holiday, which helped boost the cost of food by 23.2 percent in February from a year earlier.
Pork, the staple meat for China's 1.3 billion people, cost 63.4 percent more than in February 2007. Vegetables were up 46 percent and food oil rose 41 percent on the year.
One silver lining was that the annual rate of non-food inflation remained tame at 1.6 percent, up just a touch from 1.5 percent in January.
Still, the statistics office said it would now be harder for the government to meet its goal of holding inflation below last year's average rate of 4.8 percent.
"We need to keep a clear mind and to make correct judgments about the situation, and we will take effective measures to curb excessive growth in overall price levels to maintain sound yet rapid economic growth," the office said.

INFLATIONARY MINDSET
Central bankers around the world typically look past volatile energy and food costs when judging underlying inflationary pressures.
But that is easier said than done in China, where food accounts for a third of the consumer price basket and much more for poorer people.
The danger, economists say, is that people will see the ever-climbing headline rate and conclude that prices will keep rising, touching off demands for higher wages and making it harder for the central bank to reverse inflationary expectations.
Grumbling about high prices is already a constant in markets across a country where inflation has sown the seeds of social unrest down the ages, and the authorities will want to pull out the stops to avoid problems ahead of the Olympic Games in August.
"It's true that both the severe winter and Lunar New Year had an impact on the increase, but after so many months of big rises I'm afraid now the risks are high that China will see more broad-based inflation," said Chen Jijun, an analyst at CITIC Securities in Beijing.
"Though non-food inflation is only 1.6 percent, it has been accelerating. I think the possibility for price rises to spread from food to other sectors is growing," he added.
With bank deposit rates yielding less than half the inflation rate, economists said the figures shortened the odds that the central bank would increase interest rates for the first time this year. It raised rates six times in 2007.
Some said central bank governor Zhou Xiaochuan was likely to await less-distorted March data before acting.
But Hong Liang and Yu Song with Goldman Sachs in Hong Kong said they expected the authorities to resort to a mix of tightening policies, including higher borrowing costs and a faster rate of appreciation in the yuan's exchange rate.
"While we believe the snowstorm contributed to the high February reading, we believe that rapid money supply growth has been the main driver of high and rising inflation.
"As a result, we expect CPI inflation to remain at elevated levels in the near term even after the temporary weather-related impact dissipates," they said in a note to clients. (Additional reporting by Zhou Xin, Langi Chiang and Samuel Shen; Writing by Alan Wheatley; Editing by Ken Wills and Alan Raybould)