China’s consumer price inflation rose 0.8% year-on-year in December, up from 0.7%, the highest level since February 2023. The read came in line with market expectations.
As in November, the acceleration in inflation remains primarily attributable to rising food prices. Food inflation picked up to a 1.1% pace YoY, a 14-month high. Fresh vegetable and fresh fruit prices saw the largest month-on-month upticks — up 18.2% and 4.4% YoY, respectively. Pork prices continued to fall, but saw a slightly smaller drag in year-on-year terms, rising 0.4pp to -14.6% YoY. The YoY level has risen for three consecutive months. We expect the drag from pork price deflation to turn around this year.
Non-food inflation, on the other hand, remained unchanged at 0.8% YoY. Household appliance prices rose 5.9% YoY as we began to see an impact from 2024’s trade-in policy discounts feed through the economy. Services inflation, in the form of tourism (2.1%) and healthcare (2.9%), generally outpaced goods inflation. The transportation and communication category continued to weigh on inflation, down 2.6% YoY, primarily due to declines in transportation (-1.9%), fuel (-8.2%), and communication appliances (-0.7%). We’re also seeing the continued impact of the property market malaise, with the residence component of inflation in deflation at -0.2% YoY, driven by a -0.3% YoY drop in rents.
Core inflation was unchanged for a third consecutive month at 1.2% YoY.
Producer price index inflation rose to -1.9% YoY, up from -2.2% in November. This level marked a 16-month high and the 39th consecutive month of PPI deflation.