According to the latest data released by the National Bureau of Statistics of China on February 9th, the consumer price index (CPI) for January increased by 0.5% year-on-year, while the producer price index (PPI) decreased by 2.3% compared to the previous year. This marks the 28th consecutive month of decline, highlighting weak demand and significant pressure from tightening monetary conditions.
In January 2025, the consumer price index (CPI) for Chinese residents increased by 0.5% year-on-year, with urban prices rising by 0.6% and rural prices by 0.3%. Food prices went up by 0.4%, non-food prices by 0.5%; consumer goods prices rose by 0.1%, while service prices increased by 1.1%.
On a monthly basis, the CPI for January saw a 0.7% increase, with urban prices rising by 0.8% and rural prices by 0.5%. Food prices rose by 1.3%, non-food prices by 0.6%; consumer goods prices increased by 0.6%, while service prices rose by 0.9%. The rise in food prices could be influenced by increased demand during the Lunar New Year holiday, providing short-term support to the CPI.
Weak consumer demand and deflationary pressures persist.
Although the CPI continues to show positive growth, the rate of increase is small, indicating insufficient domestic demand and limited room for businesses to raise prices. The fact that consumer goods prices only rose by 0.1% suggests that consumer momentum remains relatively weak.
The PPI has been on a downward trend for 28 consecutive months, reflecting intense competition in industrial product pricing.
On the production side, the Producer Price Index (PPI) for industrial goods in January decreased by 2.3% compared to the previous year, remaining unchanged from December, continuing the downward trend for 28 consecutive months. The monthly PPI decreased by 0.2% in January, expanding the decline by 0.1 percentage points compared to the previous month. This indicates that industrial product prices are still on the decline, squeezing business profit margins.
The ongoing decline in the PPI may be related to the fall in raw material prices, leading to lower prices for upstream products. Additionally, weak demand makes it difficult for businesses to raise product prices, creating competitive pricing pressures. If this situation persists, it could affect corporate investment willingness and production enthusiasm, further impacting economic growth.
Deflation risks warrant continued observation, and policy support may be crucial.
The changes in CPI and PPI indicate that the current Chinese economy continues to face challenges of insufficient demand. While CPI has not shown negative growth yet, if subsequent data continues to remain weak, the risk of deflation may further increase.
Reuters quoted analysts who stated that unless the Chinese government implements additional economic stimulus policies this year to boost domestic demand and market confidence, deflationary pressures may persist. Moreover, uncertainties in the international environment, such as the US-China trade policy and global demand fluctuations, could pose additional challenges to the Chinese economy.
Overall, the January CPI and PPI data suggest that the Chinese economy remains in a low inflation environment, with both demand and supply sides showing signs of weakness.