Rising food prices caused China's annual consumer price inflation to spike to a 34 month high in December, but the full year rate fell to the lowest level in 16 years while producer deflation continued, suggesting ongoing softness in demand.
According to National Bureau of Statistics (NBS) statistics released on Friday, the consumer price index (CPI) increased by 0.8% in December compared to the same month in 2024. This increase was higher than the 0.7% increase in November and matched forecasts in a Reuters poll.
Food costs, particularly those of fresh vegetables and beef, which increased by 18.2% and 6.9%, respectively, were the primary cause of the increase, according to a statement by NBS statistician Dong Lijuan.
According to NBS data, pork prices decreased 14.6% year over year in December, but gold jewellery prices increased 68.5%. Last month, core inflation which does not include the erratic cost of food and fuel rose 1.2% year over year, remaining steady from November.
Consumer prices remained constant for the entirety of 2025, far below the "around 2" target that policymakers were aiming for. This indicates that stimulus measures, such a consumer goods trade in program, have only slightly improved sentiment and reduced deflationary pressure.
For years, as China's economy battled to recover from the epidemic, annual growth in consumer prices has fallen short of officials' expectations.
Lackluster consumer demand, overcapacity, and price competitiveness among producers have all been caused by a protracted housing market crisis and a weak labor market.
Monthly, the CPI increased by 0.2% in December after declining by 0.1% the month before and rising by 0.1% as predicted. Even though it softened from a 2.2% decline in November, the producer price index (PPI), which has been in a deflationary rut for more than three years, fell 1.9% year over year in December. According to the Reuters poll, the gauge was predicted to have dropped by 2%.
PPI decreased 2.6% for the entire year. Chinese policymakers have consistently promised to use monetary policy to encourage a pricing recovery and have clamped down on excessive competition.
Additionally, they have promised to increase people's income in order to better balance the nation's supply and demand and release the potential for consumption.
Despite slowing momentum in the second half, the $19 trillion economy is expected to have reached its growth objective for 2025.
However, as top officials have pledged to pursue a more aggressive macroeconomic policy framework, the market is looking for indications of more government support measures in 2026.
To continue funding the consumer goods trade in program in 2026, the central government has given local governments 62.5 billion yuan ($8.95 billion) from the revenues of special treasury bonds.
In order to maintain sufficient liquidity and promote growth, the government has also promised to employ flexible monetary policy measures, such as reductions in interest rates and banks reserve requirement ratios.
