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

China’s consumer inflation rose by the most in more than three years as extended holidays boosted spending and deflation in factory gate prices eased.

Data released by China’s National Bureau of Statistics on Monday showed the consumer price index rose 1.3% in February from a year ago, beating economists’ forecast for a 0.8% rise in a Reuters poll. The rise follows growth of 0.2% in January, marking the strongest recovery since January 2023, according to LSEG data.

Prices increased by 1% monthly, above economists’ expectations of a 0.5% increase.

Official data showed China’s producer price index fell 0.9% from a year ago, above economists’ expectations for a 1.2% drop, a modest decline following a 1.4% drop in January.

At the high-level economic policy-setting meeting held last week, Beijing kept its annual consumer inflation target for 2026 constant at “around 2 percent”. First set for 2025, it is the lowest level in more than two decades as Chinese policymakers seek to support domestic demand and rein in aggressive price wars that have ravaged many sectors.

The inflation target serves as a ceiling rather than a target to be achieved. While consumer prices generally remained flat in 2025, core inflation, which excludes food and energy prices, increased by 0.7% due to weak consumer confidence.

Beijing also lowered its GDP growth target this year to a range of 4.5% to 5%; This was the least ambitious target dating back to the early 1990s, as officials acknowledged persistent deflationary pressures and increasing geopolitical uncertainty.

Chinese officials to support domestic spending 250 billion yuan allocated This year’s fiscal budget ($36.2 billion) was added to subsidize the consumer exchange program (down from 300 billion yuan in 2025), and a government fund of 100 billion yuan was provided to support private investment and consumer spending.

“Speed [of these stimulus measures] Larry Hu, Macquarie’s chief China economist, said “the need for aggressive consumption stimulus is low” as exports and the manufacturing sector continue to support growth, although policymakers view weak consumption as a structural problem that needs to be addressed.

“The real factor of change is exports,” Hu said in a note last Thursday. “If exports remain strong, policymakers may continue to tolerate weak domestic consumption. Conversely, if exports fall, they will increase domestic stimulus to defend the GDP target.”

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