China consumer inflation hits three-year high as producer deflation eases

China’s consumer inflation recorded the biggest jump in more than three years, as an extended holiday bolstered spending while deflation in factory-gate prices moderated.

The consumer price index rose 1.3% in February from a year earlier, China’s National Bureau of Statistics data showed Monday, beating economists’ forecast for a 0.8% increase in a Reuters poll. The increase followed a 0.2% growth in January, marking the strongest rebound since January 2023, according to LSEG data.

Prices rose 1% month on month, above economists’ expectations for a 0.5% rise.

China’s producer price index slumped 0.9% from a year ago, better than economists’ expectations of a 1.2% fall, official data showed, moderating from a 1.4% drop in January.

In a top economic policy-setting meeting last week, Beijing kept its annual consumer inflation target steady at “around 2%” for 2026. First set in 2025, that’s the lowest level in more than two decades as Chinese policymakers sought to bolster domestic demand and rein in aggressive price wars sweeping across many industries.

The inflation target acts more as a ceiling than a target to be realized. In 2025, consumer prices were flat overall, while core inflation, which excludes food and energy prices, rose 0.7% as consumer confidence remained soft.

Beijing also lowered its GDP growth target this year to a range of 4.5% to 5%, the least ambitious target on record going back to the early 1990s, as officials acknowledged persistent deflationary pressures and heightened geopolitical uncertainty.

To bolster domestic spending, Chinese officials dedicated 250 billion yuan ($36.2 billion) in the fiscal budget this year to subsidize a consumer trade-in program — down from 300 billion yuan in 2025 — along with a 100 billion yuan government fund to support private investment and consumer spending.

“The pace [of these stimulus measures] will remain incremental,” said Larry Hu, chief China economist at Macquarie, noting that while policymakers see weak consumption as a structural issue to be addressed, the need for “aggressive consumption stimulus is low” with exports and manufacturing seen to continue powering the growth.

“The main swing factor is exports,” Hu said in a note last Thursday. “If exports remain strong, policymakers may continue to tolerate weak domestic consumption. Conversely, if exports falter, they will step up domestic stimulus to defend the GDP target.”

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