China's consumer prices drop at fastest rate in 13 months

March 10, 2025 (MLN): China's consumer price index in February fell at the sharpest pace in 13 months, while producer price deflation persisted, as seasonal demand faded and households remained cautious about spending amid job and income woes.

Beijing last week vowed greater efforts to boost consumption in the face of an escalating trade war with the U.S., but analysts expect deflationary pressures in the world's second-largest economy to persist.

The government set the 2025 economic growth target at around 5%, unchanged from last year, while lowering the annual inflation target to around 2% from around 3% last year.

The consumer price index (CPI) fell 0.7% last month from a year earlier, reversing January's 0.5% increase, data from the National Bureau of Statistics showed on Sunday.

It was the first contraction in the index since January 2024, and worse than a 0.5% slide estimated by economists in a Reuters poll.

Food prices fell 3.3% last month, versus a 0.4% rise in January.

The Lunar New Year, the country's biggest annual holiday, fell in late January compared with February last year, leading to higher food prices and tourist-related services prices in January.

CPI fell 0.2% month-on-month, against a 0.7% rise in January and below a predicted 0.1% drop.

Core inflation, excluding volatile food and fuel prices, fell 0.1% in February, in contrast to a 0.6% rise in January.

To revive sluggish household demand, China has doubled its allocation to an expanded consumer subsidy program for electric vehicles, home appliances and other goods to 300 billion yuan ($41.42bn) this year.

But more profound measures to address its incomplete welfare system are still some way off, leaving consumers and businesses wary of spending amid a sputtering economic rebound, as Reuters reported.

Reflecting such caution, per capita spending during the recent holidays grew only 1.2% from a year earlier, analysts at ANZ said in a note.

The main problems lie in "weak consumption capacity and willingness," Commerce Minister Wang Wentao said on Thursday on the sidelines of the annual parliamentary meeting.

In this year's government work report unveiled on Tuesday, consumption was mentioned 31 times, up from 21 last year, surpassing references to technology.

The producer price index fell 2.2% on year in February, easing from a 2.3% slide in January, but missing the forecast 2.1% decline.

Global tariff threats and industrial overcapacity at home are pushing Chinese exporters into price wars all over the world, forcing many of them to cut prices of their products and wages.

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