Tag: china inflation cpi ppi

China inflation data for February 2025:

Consumer Price Index -0.7% y/y, falling back into negative for the first time since January 2024

• expected
  -0.5%, prior +0.5%

Consumer Price Index -0.2% m/m

• expected
  -0.1%, prior +0.7%

Producer Price Index -2.2% y/y

• expected -2.1%, prior -2.3%

China’s National Bureau of Statistics (NBS) blames the y/y drop back into deflation for the CPI on:

• higher base in the same month last year due to the shifting Spring Festival (Lunar New Year) dates
• holiday impacts – last year’s rise in food and services prices created a high comparison base
  • the NBS says that if this were adjusted for, the CPI would have been +0.1%
• volatile international commodity prices
• weather impacts – favourable vegetable growing weather this February compared to poor weather (rains and snow, pushing up prices) in February 2024 (base effect)

On the PPI the NBS cite:

• holidays and cold-weather halted many construction projects, weakening demand for building materials
• ample coal supply during the Spring Festival holidays led to coal processing prices fallling

The blaming of cold-weather impacting PPI seems at odds with it being favourable for growing vegetables. I’m not a construction worker, nor a farmer, so maybe my pointing this out is not of much value.

If anyone wants more, let me know in the comments and I’ll do more digging on Monday.

China January CPI 0.5% y/y, highest level in five months

• expected 0.4%, prior 0.1%
• core was 0.6% y/y, from 0.4% in December
• the m/m was 0.7% (expected 0.8%, prior 0.0%)

PPI -2.3% y/y, deflation continued

• expected -2.1%, prior -2.3%

***

China’s consumer inflation accelerated in January, reaching its highest level in five months, while producer price deflation continued, reflecting mixed consumer spending during the Lunar New Year. The consumer price index (CPI) rose 0.5% year-on-year, up from December’s 0.1% increase and exceeding market expectations of 0.4%. Core inflation, which excludes food and fuel prices, also edged up to 0.6% from 0.4%.

The rise in CPI was largely driven by seasonal factors, as the earlier timing of the Lunar New Year spurred demand for travel and entertainment. Airfare prices increased by 8.9%, tourism inflation reached 7.0%, and movie and performance ticket prices surged 11.0%. However, broader consumer spending remained subdued, with per capita holiday spending rising just 1.2% from the previous year—well below the 9.4% growth seen in 2024.

Despite this uptick in inflation, deflationary pressures persist. The producer price index (PPI) fell 2.3% in January, the same as in December and exceeding the expected 2.1% decline. This prolonged factory-gate deflation signals weak demand and ongoing challenges for manufacturers.

For 2024 as a whole, CPI rose just 0.2%, continuing a 13-year trend of missing the government’s inflation target of around 3%. Looking ahead, Chinese provinces have set 2025 economic growth targets with inflation projections below 3%, indicating expectations of continued price pressures.

Meanwhile, economic headwinds persist. China’s manufacturing sector unexpectedly contracted in January, and services activity weakened, increasing calls for additional stimulus. Policymakers face added pressure as fresh tariffs from U.S. President Donald Trump threaten exports—one of the few bright spots in the economy last year.

While Beijing is likely to maintain its 2025 growth target at around 5%, economists warn that without stronger domestic demand, deflationary risks may remain a significant challenge for the world’s second-largest economy.

***

Someone is seeing positives for China, this is worth checking out:

I’ve been mentioning green shoots for China’s economy in posts over the past months. Every time I do the incoming data slaps me in the face.