BEIJING: China’s consumer prices fell at the sharpest pace in 13 months in February, while producer price deflation continued, reflecting a decline in seasonal demand and ongoing consumer caution due to concerns over jobs and income.
Data from the National Bureau of Statistics showed that the Consumer Price Index (CPI) dropped by 0.7% in February compared to the same month last year, reversing a 0.5% increase in January. This marked the first decline in the CPI since January 2024 and was worse than the 0.5% drop that economists had forecast.
Food prices were a significant driver, falling 3.3% last month, a stark contrast to the 0.4% rise seen in January. The timing of the Lunar New Year, which occurred in late January this year, led to higher food prices and increased prices for tourist-related services in January, but these effects faded by February.
On a month-on-month basis, CPI fell by 0.2%, compared to a 0.7% rise in January, and underperformed the expected 0.1% drop.
Core inflation, which excludes volatile food and fuel prices, also decreased by 0.1% in February, after a 0.6% rise in January.
To combat these challenges, the Chinese government has increased its allocation for consumer subsidies, expanding support for electric vehicles, home appliances, and other goods to 300 billion yuan ($41.42 billion) in 2025. However, more comprehensive measures to address issues with China’s welfare system are still some way off, leaving consumers and businesses hesitant to increase spending amid an uneven economic recovery.
Consumer caution is evident, as per capita spending during the recent holiday season rose just 1.2% from the previous year, according to analysts from ANZ.
The Commerce Minister, Wang Wentao, highlighted that the key issue for China’s economy is “weak consumption capacity and willingness.” The government’s recent work report emphasized the importance of boosting consumption, mentioning it 31 times, up from 21 last year.
Meanwhile, the Producer Price Index (PPI) also showed a 2.2% year-on-year decline in February, slightly easing from a 2.3% drop in January but still missing the forecasted 2.1% decline. The ongoing global tariff threats and domestic industrial overcapacity are pressuring Chinese exporters, forcing many to engage in price cuts and reduce wages to remain competitive in international markets.
