China’s Retail Inflation Drops Below Zero for the First Time in a Year

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China’s retail inflation has fallen below zero for the first time in 13 months, highlighting ongoing deflationary pressures despite government efforts to stabilize the economy.

The National Bureau of Statistics reported on Sunday that the consumer price index (CPI) declined by 0.7% in February compared to a year earlier. This marks a sharp contrast to the 0.5% gain recorded in the previous month and surpasses Bloomberg economists’ median forecast of a 0.4% drop.

A significant factor in the decline was the early timing of the Lunar New Year, which affected consumer spending patterns. The holiday, which fell entirely in February 2024, took place between late January and early February in 2025, creating a high base effect that skewed inflation data. However, when adjusted for seasonal swings, inflation actually showed a slight 0.1% increase year-on-year, according to the statistics bureau.

China’s core CPI, which excludes volatile food and energy prices, also fell by 0.1%—the first drop since 2021 and only the second contraction in over 15 years. Meanwhile, factory deflation continued for the 29th consecutive month, further indicating sluggish domestic demand.

“China’s economy still faces deflationary pressure,” said Zhiwei Zhang, president and chief economist at Pinpoint Asset Management. “Domestic demand remains weak.”

The Chinese government has set an inflation target of around 2% for 2025, down from its previous 3% goal. This adjustment reflects growing recognition among top leaders that deflation remains a significant challenge.

As China battles weak spending and a struggling property sector, March inflation data will provide a clearer picture of whether government stimulus measures are effective in boosting demand. Economists and investors will closely monitor price trends to gauge the long-term trajectory of the world’s second-largest economy.

Sourcs By Agencies