CPI rises for fourth consecutive month

China's consumer prices rose for a fourth straight month in January, while the decline in producer prices continued to narrow, signaling a gradual recovery in domestic demand as policymakers step up efforts to cushion external uncertainties and secure a solid start to 2026.

Data from the National Bureau of Statistics showed on Wednesday that China's consumer price index, the main gauge of inflation, rose by 0.2 percent year-on-year in January, easing from a 0.8 percent rise in December.

Wen Bin, chief economist at China Minsheng Bank, said price trends are "showing a pattern of low-level but moderate recovery".

Wen said that consumer price growth cooled due to the timing shift of the Spring Festival holiday, which falls in February this year compared to January last year, creating a higher comparison base. He added that the steady recovery in household consumption demand and the moderate rise in the core CPI have not changed.

The core CPI, which excludes volatile food and energy prices and is deemed a better gauge of supply-demand conditions, rose by 0.8 percent year-on-year in January, down from 1.2 percent in December, the NBS said.

On the factory-gate prices side, Wen said month-on-month gains have continued for four consecutive months, and the year-on-year decline has narrowed for two straight months, indicating prices are gradually stabilizing.

The NBS said China's producer price index, which measures factory-gate prices, fell by 1.4 percent year-on-year in January, narrowing from a 1.9 percent dip in December. On a month-on-month basis, the PPI increased by 0.4 percent in January, accelerating from a 0.2 percent rise in December.

As external price headwinds ease and domestic demand becomes a more important driver, alongside the lower comparison base from the previous year, "the continued narrowing of PPI declines will be the main trend in the coming months",Wen said.

Looking ahead, Feng Lin, executive director of the research and development department at Golden Credit Rating International, said she expects CPI growth in February to climb to around 1 percent as the timing shift effects of the Spring Festival holiday reverse.

"The country's CPI will likely rise by around 0.6 percent in the first two months of 2026 amid the government's effective measures to boost consumption and pursue anti-involution, extending the warming trend seen since the second half of 2025."

Despite the recent improvement in domestic demand, Feng cautioned that inflation still remains subdued, citing lingering property market adjustments, soft consumer sentiment and external uncertainties. She expects full-year CPI inflation at around 0.5 percent in 2026.

"The current low inflation environment will continue through 2026," Feng said. "This provides ample room for policymakers to step up growth-stabilizing measures at an appropriate time, particularly for the central bank to cut interest rates when necessary."

Noting that the Chinese economy is displaying steady performance with positive progress while acknowledging that domestic demand remains weak, the People's Bank of China, the country's central bank, will continue to implement a moderately loose monetary policy, according to its monetary policy implementation report for the fourth quarter 2025, released on Tuesday.