Inflation slows dramatically in China

Food prices are still rising in China, but at a much slower pace than last summer.

NEW YORK (CNNMoney) -- Inflation in China slowed dramatically in February, as temporary price hikes related to Lunar New Year faded.

Consumer prices rose 3.2% from a year ago, China's National Bureau of Statistics reported Friday -- a steep slowdown from a 4.5% inflation rate in January.

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Heightened demand for goods and services during the Chinese New Year causes a temporary uptick in prices around that time. But prices usually fall back after the holiday, which ended in early February.

Food, which accounts for roughly a third of the government's official inflation measurement, tends to be one of the most volatile items for consumers.

Compared to a year earlier, food prices were up 6.2%, marking a significant improvement from last July when they were rising at a blistering 14.8% pace.

In his annual report to the National People's Congress on Monday, Premier Wen Jiabao said the government's goal is to maintain an inflation rate around 4% a year.

Slowing inflation, as in February, comes as a welcome sign for the government, freeing it up to focus more on stimulating the economy. China is the world's second largest economy and also one of the fastest growing, but recently, that growth has started to slow.

On Monday, Wen said the government is aiming for economic growth of 7.5% in 2012, a slowdown from last year's target of 8% growth.