An alarming surge in Chinese consumer prices in February has forced economists to revise upwards their inflation forecasts for 2008 amid fears that higher food prices will persist and spread to the rest of the economy.

The February inflation rate of 8.7 per cent was the highest in 12 years and is expected to be deeply worrying for a government that has spent a lot of energy recently trying to talk down consumer and business concerns about inflation.

Global interest in inflation in China has increased over the past year amid concerns that it could feed into higher prices elsewhere, although economists argue that inflation is just one of a number of factors putting pressure on Chinese export prices.

The February figure, up from 7.1 per cent in January, was received with caution by some economists, who warned that seasonal factors made it unreliable as a monthly figure.

The impact of China’s lunar new year holiday, which falls in the first two months of the year, always makes the February figure difficult to analyse in isolation. Winter storms that disrupted transport and power supplies across central and southern China in February have added to uncertainty.

But the 8.7 per cent figure, the highest since May 1996, was well above market expectations and prompted a rash of warnings about the dangers to the Chinese economy of persistently rising prices.

Jun Ma, of Deutsche Bank, in Hong Kong, said the chances of the government meeting its inflation target of 4.8 per cent for this year, a figure announced only last week, were now “close to zero”.

“The immediate implications [of the February figure] are that monetary policy will have to be tightened more aggressively, policy uncertainty from other ad hoc measures will intensify, and growth is facing further downside risks,” he said.

Mr Ma revised his inflation forecast for the year to 7.2 per cent, up from 6.4 per cent in mid-February. Morgan Stanley raised its forecast from 4.5 to 6.5 per cent.

The government has talked tough on inflation in recent months, freezing the prices for goods still controlled by the state, and ordering local authorities to report “abnormal” increases in other sectors.

Wen Jiabao, Chinese premier, opened the annual session of the National People’s Congress last week by declaring that fighting inflation was the government’s economic priority.

But with inflation persisting longer than had been expected after last year’s pork shortages began to push up staple food prices, the difficulties of isolating its impact are growing.

“Overall inflationary pressures are still fairly great. As we know, global grain, edible oil and crude oil prices are rising,” said Xie Fuzhan, the head of China’s National Bureau of Statistics. “Many countries are also experiencing rising inflation. So I think the pressure for global prices to pass through into the Chinese economy is greater than before.”

Jonathan Anderson, of UBS, said it was crucial to acknowledge that the “pattern” of inflation, which was concentrated in food, had still not changed.

“Core goods and services prices did not accelerate. Most food items did not accelerate: nearly all of the February increase came from a surge in fresh vegetable prices and a further surge in fresh meat prices,” he said.

Andy Rothman, of CLSA, in Shanghai, said he expected food prices to begin to fall by this summer, with CPI reaching 5 per cent for the full year, just ahead of the government’s estimate.

“The flip side of our optimism on consumer prices is our strong pessimism on manufacturing margins, as producers will be unable to pass on more than a fraction of rising input costs,” he said.

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