China’s inflation reached its highest level in nearly three years in December, with the consumer price index (CPI) increasing by 0.8% year-on-year. The figure followed a 0.7% increase in November and met the median forecast from a Reuters survey.
This marks the strongest rise since February 2023 and came as holiday spending gained momentum, though persistent deflation at the factory gate highlighted subdued underlying demand.
A key factor behind this was an 18.2% year-on-year jump in fresh vegetable prices, attributed to supply constraints during the cold winter months. In contrast, pork prices saw a significant drop of 14.6%.
Meanwhile, the core inflation rate, which excludes the more volatile categories of food and energy, remained steady at 1.2% on an annual basis in December, matching the previous month’s pace.
Month-on-month, the CPI rose by 0.2%, topping the 0.1% increase anticipated by economists polled by Reuters.
Despite the acceleration in consumer prices, the producer price index (PPI) logged a 1.9% decline in December year-on-year, narrowing from a 2.2% drop in November and less severe than the expected 2% fall, partly due to costlier non-ferrous metal materials, while prices for durable consumer goods sliped 3.5% over the year.
China appears on course to meet its 2025 economic growth target of approximately 5%, but a sluggish property sector and an uncertain job market continue to weigh on consumer confidence, intensifying deflationary forces.
Economists at Bank of America Global Research estimated that China’s annual GDP growth may slow to 4.5% in the fourth quarter, easing from 4.8% in the previous three months.
At a pivotal policy meeting in early December, Communist Party leaders restated commitments to reinforce consumption and stabilize the real estate sector. However, similar promises in recent years have so far produced limited tangible results.
