China will release its consumer price index (CPI) and producer price index (PPI) inflation data on Sunday, March 9, at 0130 GMT. The CPI is anticipated to return to deflation on both a month-on-month and year-on-year basis.
The CPI showed a downward trend from August to December 2024 due to weak consumer demand, before a rebound in January 2025 attributed to seasonal spending. In contrast, the PPI remains in deflation, highlighting ongoing challenges in the industrial sector despite government support measures.
CPI And PPI Trends
For the CPI readings: August 2024 was at +0.5%, September at +0.4%, October at +0.3%, November at +0.2%, December at +0.1%, and January 2025 rebounded to +0.5%.
For the PPI: August 2024 showed -2.3%, September at -2.5%, October at -2.9%, November at -2.5%, December at -2.3%, and January 2025 recorded -2.3%, indicating persistent deflationary trends over the months.
These inflation figures tell us a great deal about economic conditions and what could unfold in the weeks ahead. A return to consumer price deflation suggests that household demand remains subdued following January’s temporary uptick. The previous downward streak from August through December showed a consistent weakening in prices, with only a brief surge in early 2025 due to seasonal effects. That bump is now fading. If CPI data confirms expectations, policymakers may need to reassess how effective recent measures have been in spurring domestic consumption.
Producer prices, on the other hand, have stayed negative for half a year, pointing to persistent struggles for manufacturers. Despite government efforts to stabilise factory activity, industry players continue to face weak pricing power. The slight fluctuation in PPI readings over recent months suggests the sector isn’t seeing meaningful cost pressures, which typically indicates soft demand. Without a material shift, businesses may find it difficult to pass costs downstream, keeping margins thin across industrial supply chains.
Potential Market Impact
If deflation deepens, it could affect sentiment in broader financial markets, with knock-on effects beyond China’s borders. Investors watch these indicators closely, particularly given the weight of manufacturing within global trade. Furthermore, sustained price declines might reinforce expectations of additional monetary or fiscal intervention. Recent trends suggest that earlier measures have yet to generate lasting momentum across consumer and producer segments.
In the coming weeks, it will be essential to track not just the inflation prints, but also any adjustments in policy or liquidity conditions. A weak CPI number could fuel debate about further stimulus, while stubbornly low PPI figures might pressure industrial firms into price adjustments or cost-cutting measures. If external demand remains tepid, businesses dealing with trade-dependent sectors may experience prolonged earnings pressures.
All eyes will be on whether authorities take a more aggressive stance in response to weaker inflation data. Recent experience suggests temporary fluctuations have not been enough to shift broader price trends. Any policy responses will shape expectations going forward, particularly for those navigating price-sensitive sectors.
