China’s Prices Stabilize, But Reflation Still Out of Reach

Rather than a convincing reflation narrative, China's most recent inflation statistics point to a very low but stable pricing environment. headline Supported by services and a lower draw from food and energy, CPI has returned to somewhat positive territory at about 0.2% year on year, transforming from minor deflation to a small increase. Prices are rising monthly, validating the genuine but still fragile turn away from total deflation.

Year on year, core CPI, excluding food and energy, is hovering in the low 1% range, indicating very slow but slightly rising underlying demand. The difference between headlines and core suggests that volatile ingredients—especially food—are masking the picture of still-weak national demand. So far, there is no sign of widespread inflation pressure, reflecting a strong demand recovery.

On the manufacturing side, PPI is still deflationary at roughly ‑2.1% year on year, but the contraction is the least in around three years, suggesting a preliminary bottoming in the industrial price cycle. Though margins in heavy business remain under stress, softening commodity headwinds and somewhat better export pricing have assisted. Together, close-to-zero CPI and negative PPI keep China in a disinflationary/near-deflation regime, enabling the PBoC room to remain accommodative and advocate for sustained targeted policy support rather than tightening, with limited short-term upside for world reflation trade.