Citizens select fruit at a supermarket in Changchun, capital of northeast China's Jilin Province, Jan. 11, 2013. China's Consumer Price Index (CPI), the main gauge of inflation, grew by 2.5 percent in December 2012 year on year, the State Bureau of Statistics announced on Jan. 11, 2013. The growth rate was 0.5 percentage points higher than last November. (Xinhua/Lin Hong)

BEIJING, Jan. 11 (Xinhua) -- China's consumer price index (CPI), a main gauge of inflation, grew 2.5 percent year on year in December, the fastest pace since June, the National Bureau of Statistics (NBS) announced Friday.

The inflation rate increased from 2 percent in November and 1.7 percent in October as food prices increased.

China's CPI rose 2.6 percent last year, well below the government's annual target of keeping inflation under 4 percent, according to an NBS statement.

On a month-on-month basis, December's CPI rose 0.8 percent from the previous month.

"The notable jump in December's CPI was largely attributable to a surge in food costs, especially vegetable prices," said Yu Qiumei, a senior statistician with the bureau.

Food prices, which account for nearly one-third of weighting in the calculation of China's CPI, rose 4.2 percent in December from one year earlier, pushing the CPI up 1.37 percentage points.

China is experiencing unusual cold winter, with national average temperatures reaching a 28-year low. Persistent icy weather has wreaked havoc in south China, disrupting traffic, damaging power facilities and affecting agricultural production.

Vegetable prices jumped 14.8 percent year on year in December as cold weather disrupted supplies, pushing the CPI up 0.41 percentage points.

Prices for aquatic products gained 6.1 percent from one year earlier, according to the statement.

Excluding food prices, China's CPI edged up 1.7 percent.

"Food prices are likely to rise further due to the impact of the cold weather on vegetable production and transportation as well as the consumption rush during the upcoming Spring Festival," according to Yu.

Wang Jun, an expert with the China Center for International Economic Exchanges, said the country will face greater inflationary pressures in 2013 than in 2012.

"Pork prices will head into a new upward cycle this year. Inflation is likely to rise in the coming months, as a result of rising food prices, higher labor and land costs, quantitative easing in the industrial world and stabilizing domestic economic growth," Wang said.

He suggested the government stay vigilant against inflation, but ruled out the possibility of hyperinflation this year as the economy is undergoing a mild recovery and many industries will continue to face oversupply woes.

Wang said he expects the CPI to stay between 3 to 4 percent this year.

The NBS said in the same release that China's producer price index (PPI), which measures inflation at the wholesale level, fell 1.9 percent year on year in December.

This marks the 10th straight month of decline after the PPI dropped in March for the first time since December 2009.

The drop was smaller than the 2.2-percent decrease in November, indicating that the economy has been stabilizing.

With inflation poised for a moderate increase, the government may slow the pace of interest rate and reserve requirement ratio (RRR) cuts for fear of reigniting a price spiral.

In order to buoy growth, the central bank cut the RRR twice in 2012. It also lowered benchmark interest rates twice over the course of the year.

"The government should continue to keep a prudent monetary policy in 2013, and adopt a more proactive fiscal policy and extend tax cuts to stabilize economic growth," Wang said.

China's economy grew 7.4 percent in the July-September quarter from a year earlier, the slowest pace since the first three months of 2009 during the global financial crisis.

The NBS will release fourth-quarter gross domestic product figures, retail sales, fixed-asset investment and other key economic data next Friday.

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