China’s latest inflation readings point to a recovery that remains uneven, with rising consumer prices offset by a deeper slump in factory prices.
The figures provide new context for how the country’s economy is adjusting to weak demand, excess industrial capacity, and persistent pricing pressure across supply chains.
November’s data show that headline inflation picked up at the fastest pace in more than a year, yet this improvement has not eased concerns about widespread deflation across important sectors.
The update, published by the National Bureau of Statistics on 10 December, arrived alongside market reactions in government bonds and equities as investors assessed the strength of the underlying trend.
Consumer prices rise
China’s consumer price index increased 0.7% in November from a year earlier. The pick-up was driven mainly by higher food costs, which helped break a long stretch of exceptionally weak price gains.
Core CPI, which excludes food and energy, remained unchanged at 1.2% after ending a six-month run of acceleration.
The data reinforced views that consumer demand is stabilising only gradually, even as headline inflation edges upward.
Factory prices weaken
While CPI improved, factory prices moved in the opposite direction. Producer prices fell 2.2% in November, extending deflation to a 38th month.
The decline pointed to ongoing pressure on corporate margins as businesses continue adjusting to subdued domestic spending and stiff competition.
A prolonged downturn in housing and soft consumption has weighed on industrial activity since the end of the pandemic, while oversupply in several sectors has added to the strain.
The drop in producer prices also pushed the GDP deflator toward what is set to be a third consecutive annual decrease by the end of 2025, marking the longest such streak since China’s shift toward a market-based economy in the late 1970s.
Markets react
Financial markets responded quickly to the mixed readings.
Yields on 10-year and 30-year Chinese government bonds reversed earlier gains after the producer-price figures came in weaker than expected.
Onshore and offshore equities also held onto losses through the day as investors evaluated what the combination of mild CPI growth and persistent PPI deflation signals for earnings and broader economic momentum.
The update followed ongoing efforts by authorities to rein in intense price competition and support domestic demand, although recent data suggest that challenges remain across several industries.
Economic pressures persist
The latest figures highlight how deflationary forces continue to complicate China’s recovery.
Although consumer inflation has improved for two months, the rise is not yet strong enough to shift expectations on growth or corporate performance.
Market participants are watching for a longer stretch of firmer price data, as well as clarity on future fiscal measures, before adjusting their view on the strength of China’s economic rebound.
With deflation entrenched in factories and capacity still elevated in multiple sectors, November’s data underline the contrasting forces shaping the country’s economic landscape.
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