BEIJING - China's annual inflation rate hit 4.5 per cent in January, the highest level in three months, official data showed Thursday, as the Chinese Lunar New Year holiday boosted consumer prices.

The country's consumer price index had slowed to 4.1 per cent in December as government efforts to curb bank lending and surging property prices took effect.

Analysts said the Chinese New Year holiday, also known as the Spring Festival, was unusually early this year and had significantly distorted the monthly data.

Retail spending typically soars during the festival, the most important celebration in the Chinese calendar, as consumers splash out on food, wine and gifts for family and friends.

Before January, inflation had eased for five straight months after hitting a more than three-year high of 6.5 per cent in July and analysts said the downward trend would likely resume in February as the economy slowed.

"It was inevitable that we would see some impact of the Lunar New Year holidays, which were in January this year but February last year, but it seems that this impact was bigger than expected," said Brian Jackson, a senior analyst at Royal Bank of Canada in Hong Kong.

Analysts had expected inflation to rise 4.1 per cent, according to a Dow Jones Newswires survey.

The rebound in inflation was driven by food prices, which soared 10.5 per cent year on year in January compared with 9.1 per cent in December, the National Bureau of Statistics said in a statement.

The producer price index, which measures the cost of goods at the farm and factory gate, rose 0.7 per cent in January compared with 1.7 per cent in December, the statement said.

Bank of America-Merrill Lynch economist Lu Ting said the data was "significantly distorted" by the holiday "so investors definitely should not read too much into the inflation".

There is mounting evidence that China's growth is slowing as the ongoing crisis in Europe and weakness in the United States hurts demand for Chinese exports, a key driver of the world's second largest economy.

The International Monetary Fund this week warned that an escalation of Europe's debt crisis could slash China's economic growth in half this year, and it urged Beijing to prepare stimulus measures in response.

But Chinese leaders have been very cautious about opening the credit valves for fear of reigniting inflation, which has the historic potential to trigger social unrest in the country of more than 1.3 billion people.

Late last year the central bank eased lending restrictions on banks and analysts expect similar moves in the coming months as authorities try to spur economic activity and prevent a damaging collapse in the property market.

"There remains plenty of downward momentum in China, despite a moderation in the slowdown," said Alistair Thornton, a Beijing-based analyst for IHS Global Insight.

"The property market remains in the throes of a correction, which is dragging down investment spending and spreading deflationary pressure (and) the eurozone will act as a drag on export growth this year."