China inflation hits near three-year high in December as full-year CPI
HAIKOU, CHINA – JANUARY 01: Customers shop at CDF Haikou International Duty Free City on January 1, 2026 in Haikou, Hainan Province of China.
Luo Yunfei | China News Service | Getty Images
China’s consumer inflation accelerated in December to the fastest pace in nearly three years as spending picked up ahead of the New Year holiday, while factory-gate deflation remained entrenched, signaling that underlying demand stayed weak.
Consumer prices rose 0.8% from a year earlier, their highest level since February 2023, according to data from the National Bureau of Statistics on Friday. The improvement followed a 0.7% climb in November and matched the economists’ expectations in a Reuters poll.
The rebound in consumer prices was largely driven by fresh vegetables, which rose 18.2% from a year earlier due to supply shortages during the cold winter. Among other food items, pork prices fell 14.6%.
Core inflation, which excludes volatile prices of food and energy, was up 1.2% year on year in December, unchanged from the growth in the prior month.
On a monthly basis, consumer prices grew 0.2%, above the expected 0.1% gain in a Reuters poll.
Still, for 2025 as a whole, the inflation gauge was flat, missing the official target of “around 2%,” signaling that Beijing’s stimulus measures implemented so far, including a consumer goods trade-in program, have done little to boost demand.
Producer prices dipped 1.9% in December from a year earlier, better than the forecast 2% decline, extending the deflationary streak beyond three years. The drop moderated from a 2.2% fall in November, partly due to higher prices for non-ferrous metal materials.
Prices for durable consumer goods dropped 3.5% from a year earlier.
Lijuan Dong, chief NBS statistician, said that gold jewelry prices surged 68.5% year on year in December, driven by a global rush into the precious metal amid recession fears and market uncertainty.
Longest deflationary streak
While China is on track to achieve its growth target of about 5% last year, the economy has continued to face deflationary pressure. Consumers have remained reluctant to spend amid an uncertain employment outlook and a prolonged property crisis that has eroded household wealth.
Larry Hu, chief China economist at Macquarie, expects China’s annual consumer inflation to remain flat in 2025, while producer price deflation is forecast at 2.7%, which would mark the longest deflationary streak on record.
China’s real GDP growth will likely soften to 4.5% in the fourth quarter, down from 4.8% in the third quarter, said a team of economists at Bank of America Global Research.
The Wall Street bank said the contraction in fixed-asset investment likely deepened in December, dropping around 11.8% from a year earlier, compared with an 11.1% decline in November. Industrial production growth is estimated to have edged up to around 4.9%, supported by a pickup in manufacturing activity and the “usual year-end acceleration in output.”
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