China inflation data: February CPI comes in at -0.7% y/y (expected -0.5%)

China inflation data for February 2025:

Consumer Price Index -0.7% y/y, falling back into negative for the first time since January 2024

• expected
  -0.5%, prior +0.5%

Consumer Price Index -0.2% m/m

• expected
  -0.1%, prior +0.7%

Producer Price Index -2.2% y/y

• expected -2.1%, prior -2.3%

China’s National Bureau of Statistics (NBS) blames the y/y drop back into deflation for the CPI on:

• higher base in the same month last year due to the shifting Spring Festival (Lunar New Year) dates
• holiday impacts – last year’s rise in food and services prices created a high comparison base
  • the NBS says that if this were adjusted for, the CPI would have been +0.1%
• volatile international commodity prices
• weather impacts – favourable vegetable growing weather this February compared to poor weather (rains and snow, pushing up prices) in February 2024 (base effect)

On the PPI the NBS cite:

• holidays and cold-weather halted many construction projects, weakening demand for building materials
• ample coal supply during the Spring Festival holidays led to coal processing prices fallling

The blaming of cold-weather impacting PPI seems at odds with it being favourable for growing vegetables. I’m not a construction worker, nor a farmer, so maybe my pointing this out is not of much value.

If anyone wants more, let me know in the comments and I’ll do more digging on Monday.

Background (I posted this on Friday, repeating here):

China’s CPI showed a general downtrend from August to December 2024, reflecting weak consumer demand, before rebounding in January 2025 due to seasonal spending.

Meanwhile, PPI remained firmly in deflationary territory, suggesting that industrial sector challenges persist despite government stimulus efforts.

The data indicates that while consumer inflation has fluctuated, factory prices remain under pressure, signaling ongoing concerns about China’s economic recovery.

In more detail:

All the below monthly results are y/y Consumer Price Index (CPI):

• August 2024: +0.5% – The highest rise since early 2024, signaling some inflationary pressure.
• September 2024: +0.4% – Slight slowdown from August but still indicating moderate price growth.
• October 2024: +0.3% – Continued deceleration, reflecting subdued consumer demand.
• November 2024: +0.2% – The lowest increase since June, raising concerns about deflation risks.
• December 2024: +0.1% – Further slowdown, indicating weak domestic demand.
• January 2025: +0.5% – A notable rebound, largely due to increased consumer spending during Lunar New Year.

All the below monthly results are y/y Producer Price Index (PPI):

• August 2024: -2.3% – Continued factory-gate price deflation, reflecting weak industrial demand.
• September 2024: -2.5% – Further decline, signaling persistent deflationary pressure in the industrial sector.
• October 2024: -2.9% – The sharpest drop in months, marking the 25th consecutive month of factory price declines.
• November 2024: -2.5% – Slight improvement from October, but factory deflation remains significant.
• December 2024: -2.3% – Deflationary trend continues, extending to 27 straight months of decline.
• January 2025: -2.3% – No significant improvement, indicating ongoing challenges in the industrial sector.

This article was written by Eamonn Sheridan at www.forexlive.com.