Two bomb blasts in a crowded Baghdad market have killed at least eight people and wounded 21, Iraqi officials say.

Explosives-laden bags left among a pile of rubbish near a falafel stand at the market were detonated late on Sunday evening.

Police and hospital officials said five children were among those killed in the incident which also damaged several stores in the predominantly Shia area in the eastern part of the city.

Raad Nasir, 26, a cell phone store owner in the area on his way to the falafel stand when the blast occurred said he saw the horrible scene and rushed home.

"We were starting to be happy that our area was safe and not like before, but now the terrorists have resumed their cowardly crimes against civilians," he said.

Spike in violence

The US military says fighters are trying to re-ignite sectarian violence that pushed Iraq to the brink of civil war.

Nearly 160 people have been killed in blasts in August alone so far, indicating a more sustained effort by fighters in recent weeks to stoke tensions.

The surge in violence follows the June 30 withdrawal of US forces from major towns and cities, raising concerns about the ability of Iraqi forces to protect the people as the country prepares for national polls scheduled for January.

Mindful of the public's sense of insecurity, the Iraqi government on Sunday announced the indefinite postponement of a nationwide census after warnings that it could add to ethnic and political tensions.