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Consumer prices in China in December fell to 0.1% annuallydata from the Office for National Statistics showed on Thursday, fueling concerns about deflation.
The increase in headline inflation was in line with Reuters estimates, but less than the 0.2% increase in November. The core CPI, which excludes food and energy prices, rose 0.4% year-on-year, compared with a 0.3% rise in the previous month, the data showed.
On a monthly basis, China’s CPI was unchanged from a 0.6% decline in the previous month.
Food prices fell by 0.6 percent compared to the previous month due to favorable weather conditions, official statistics show. Fresh vegetables and fruits fell in price by 2.4% and 1%, respectively. Pork prices, which make up a significant part of the CPI basket, fell by 2.1%.
“A decline in pork prices in 2025 will have a negative impact on overall CPI,” analysts at ANZ Bank wrote in a note. Year-over-year prices for pork and fresh vegetables remain high, up 12.5%.
Wholesale prices continued to fall for the 27th straight month, with producer price inflation in China falling 2.3% year-on-year in December. The figures came in slightly better than Reuters estimates of a 2.4% decline.
On a monthly basis, PPI fell 0.1% from a 0.1% rise in November as infrastructure and real estate projects were temporarily suspended during the off-season, the Office for National Statistics said, dampening demand for steel.
Consumer inflation, which continues to hover near zero, suggests that China continues to struggle with weak domestic demand that has raised the specter of deflation.
Consumption has not picked up despite a series of stimulus measures introduced by Beijing since then last Septemberwhich included lowering interest rates, supporting stock and real estate markets, and increasing bank lending.
As recently as Wednesday, China expanded a consumer sharing scheme aimed at boosting consumption equipment upgrades and subsidies.
These subsidies are “a kind of quick fix” aimed at specific products but don’t do much for broad consumption, said Louise Lu, chief economist at Oxford Economics.
“There are (also) significant payback effects going forward, meaning that what is spent now will not be spent later,” she told CNBC’s “Street Signs Asia.”
Sean Raine, managing director of China Market Research Group, said that while China’s cash-for-rubble program has merit, it is not enough to lift the retail sector: “How many air conditioners can one family have?”
“Ahead of Chinese New Year, deflation looms over China’s economy as consumers look for bargains when buying gifts for family members,” he told CNBC via email. Consumers will continue to wait for deep discounts and buy only when they have them, Raine noted.
Some indicators, however, signal that China’s economy may experience some recovery. Countries the activity of the factory expanded over the past three months, although the rate of expansion slowed in December.
“While China’s economy has shown some signs of recovery since the policy change in September, it still faces significant challenges,” said Carlos Casanova, senior economist at private bank Union Bancaire Privée, citing a backlash in the country’s real estate sector and trade tensions with the U.S.
Lu, the lead economist at Oxford Economics, expects China’s path to reflation to remain elusive by most estimates, given persistent weakness in consumer appetite.
of China onshore yuan hit a 16-month low of 7.3316 against the dollar on Wednesday as Treasury yields rose and the greenback strengthened.
