China’s consumer inflation accelerated at the end of 2025 — but the headline number hides a messy picture beneath the surface.
Consumer prices rose 0.8% year‑on‑year in December, the fastest pace since February 2023, according to official data. On the same day, producer prices — the factory‑gate measure — remained in deflation, down 1.9% year‑on‑year, though that decline was slightly smaller than economists had expected. Monthly CPI also surprised to the upside, climbing 0.2% from November.
A food story, not a consumption boom
The rebound wasn’t broad‑based. Fresh vegetables exploded in price — surging about 18% year‑on‑year as winter shortages tightened supplies — while pork prices continued to slump, down 14.6% from a year earlier. The National Bureau of Statistics also flagged an eye‑catching jump in gold jewelry prices, which spiked amid global safe‑haven demand.
Core inflation — which strips out volatile food and energy — crept up to 1.2% year‑on‑year, unchanged from November. That underlines the key point: underlying domestic demand is still tepid. Durable consumer goods prices remain weak, and industrial firms are still suffering, with corporate profits and investment under pressure.
Production and activity mixed
There were some signs of life in activity data: the official manufacturing PMI ticked back above the 50 threshold to 50.1 in December, ending an eight‑month stretch of contraction. Industrial production showed the usual year‑end pickup, and some economists now see a softer but positive growth backdrop as China pushes to meet its annual targets.
Why markets care
The divergent signals — firmer consumer prices driven by food, but persistent factory‑gate deflation — complicate the policy outlook. Policymakers have signaled willingness to shore up consumption and the property market, and analysts expect measures such as small mortgage‑rate cuts and eased purchase restrictions could be on the table. Yet many experts warn any measures may be incremental and won’t instantly revive household spending dragged down by a prolonged property slump.
Traders reacted across markets. Mainland indices slipped modestly (the CSI 300 was down about 0.25%), while Hong Kong and Japan saw small gains. Commodity and mining stocks wobbled after headlines about merger talks between major miners, sending Rio Tinto shares lower; meanwhile Fast Retailing — the Uniqlo owner — jumped sharply after reporting stronger profits and raising its outlook, reflecting how some exporters and retailers can still find growth pockets.
Overnight in the U.S., equities diverged: the Dow rose strongly while the tech‑heavy Nasdaq cooled as investors rotated away from expensive growth stocks ahead of key U.S. jobs data.
Policy crossroads
Economists such as Larry Hu at Macquarie and teams at global banks point to a longer slog: producer‑price deflation looks entrenched and, if sustained, could keep profit margins under strain and feed reluctance to hire or boost wages — a self‑reinforcing drag on spending. That’s why Beijing has talked about a “comprehensive” package to stabilize real estate rather than piecemeal fixes, and has nudged some sectors toward production discipline to curb oversupply.
For investors and analysts, making sense of the data means sifting through noisy, often short‑lived price moves. Markets increasingly lean on richer data and new analytical tools to parse those signals. Institutional and retail users are already experimenting with platforms that incorporate large‑scale data search and prediction tools to track inflation drivers and corporate earnings trends, including recent advances in finance‑focused searching and modelled insights. See how market data tools are evolving with Google Finance’s new deep‑search features and broader workspace integrations that aim to bring research inside email and documents Google Finance’s Gemini Deep Search and prediction tools and Gemini’s deeper research links into Gmail and Drive.
What this means going forward
Expect policymakers to keep a cautious, targeted approach: nudge mortgage costs down where feasible, lean on measures to stabilize property sales, and tolerate modestly looser conditions in hopes of coaxing more consumer spending. But a durable recovery in prices tied to household demand will likely require a broader turnaround in employment and asset sentiment — not a quick fix.
For now, December’s data is a reminder that China’s economic script is full of nuances: headline inflation can tick up on the back of weather and seasonal quirks, even as deep‑seated disinflationary forces quietly persist in factories and investment.