China’s Inflation Split: Consumer Prices Stir While Factory Gate Remains in the Doldrums

With a CPI increase of 0.8% year-on-year, up from 0.7% in November and representing the quickest rate since February 2023, China's consumer inflation picked up a little in December 2025. A rise in food prices helped to propel the increase, mostly, which points to some recovery in family consumption or more stringent supply circumstances in important food sectors. On a monthly basis, CPI climbed 0.2%, double the projected 0.1%, while core CPI (excluding food and energy) stayed stable at 1.2% y/y, showing that underlying pricing pressures are still modest but stable.

On the industrial side, price pressures stay modest. The Producer Price Index (PPI) fell 1.9% year-over-year, therefore better from November's -2.2%, but still clearly in negative ground. This continuous factory-gate inflation points to weak demand in upstream sectors and ongoing stress in industries related to the property market, namely construction materials and heavy industry. Though the rate of decline is slowing, it still indicates to a weak investment and industrial environment.

The mix of steadily firming consumer inflation and still-deflationary producer prices reveals a structural asymmetry in the Chinese economy. This divergence makes it more important for politicians to introduce more focused help for consumption and to calm the troubled real estate market. For global markets, the most recent data feeds into a larger reflation story and raises expectations that the People's Bank of China may offer additional rate cuts in 2026 as it tries to foster growth without letting inflation overheat.