China’s consumer inflation accelerated to its fastest in five months in January, rising 0.5% year-over-year, while producer price deflation persisted, reflecting mixed consumer spending and weak factory activity.
The increase was driven by a faster-than-expected rise in core inflation, excluding volatile prices for food and fuel, which sped up to 0.6% in January from 0.4% the previous month. However, producer prices remain deflated, with a decline of 2.3% year-over-year.
Analysts warn that deflationary pressures are likely to persist unless policymakers can rekindle sluggish domestic demand. The impact of U.S. tariffs on Chinese goods has added pressure on Beijing to spur growth in the world’s second-largest economy.
The consumer price index was skewed by seasonal factors, including the Lunar New Year holiday, which typically sees prices rise as consumers stockpile goods. However, per capita spending during the holidays grew only 1.2% from a year earlier, compared to a 9.4% increase in 2023.
China’s provinces have announced 2025 economic growth targets with an average target price below 3%, suggesting policymakers are anticipating changes and pressures on prices. Beijing is widely expected to retain its economic growth forecast of around 5% this year, but fresh U.S. tariffs will put stress on exports, one of the few bright spots in the economy last year.
The government is not expected to change monetary or fiscal policy before the annual parliament session in March, with external uncertainty seeming to rank higher than domestic economic challenges at this stage.
Source: https://www.reuters.com/markets/asia/chinas-consumer-inflation-quickens-january-producer-deflation-persists-2025-02-09