China's Consumer Prices Rise in October, Signaling Potential Easing of Deflation

Consumer Prices Rebound After Months of Decline

China's Consumer Price Index (CPI), a key gauge of inflation, unexpectedly rose by 0.2% year-on-year in October 2025, according to data released by the National Bureau of Statistics of China (NBS). This marks the first positive reading since June and represents a significant shift after consumer prices had declined by 0.3% in September and 0.4% in August. The increase defied market expectations, which had largely anticipated no change for the month.

On a month-on-month basis, the CPI also saw an increase of 0.2% in October, following a 0.1% gain in September. The core CPI, which excludes volatile food and energy prices, climbed by 1.2% year-on-year, reaching its highest level in 20 months and marking the sixth consecutive month of acceleration.

Factors Driving the Uptick in Prices

The rebound in consumer prices has been attributed to several factors, including the continued effects of government policies aimed at expanding domestic demand and promoting consumption. A significant contributor was increased spending during the Golden Week holiday period, which combined the National Day and Mid-Autumn Festival from October 1st to 8th.

During this extended holiday, surging travel demand led to notable price increases: hotel accommodation rose by 8.6% month-on-month, and airfare increased by 4.5%. Higher consumer demand also impacted the prices of certain goods, including fresh vegetables, fruits, lamb, and beef. Non-food inflation accelerated to 0.9%, up from 0.7% in September, with prices for housing, clothing, healthcare, and education also showing growth.

Lingering Deflationary Pressures and Economic Outlook

Despite the positive CPI reading, analysts caution that China's economy continues to face lingering deflationary pressures. While consumer prices are rising, the Producer Price Index (PPI), which measures factory-gate prices, fell by 2.1% year-on-year in October. Although this was an improvement from the 2.3% decrease in September and better than expected, it marks the 37th consecutive month of factory-gate deflation.

Economists view the uptick in CPI as a potential signal that the worst of China's deflationary pressures might be easing and that domestic demand could be stabilizing. Wen Bin, chief economist at China Minsheng Bank, anticipates that China's CPI will maintain its upward trend as pro-consumption policies continue to take effect. However, experts like Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, emphasize that it is 'too early to conclude the deflation is over,' pointing to weak domestic demand, a property market slump, and industrial overcapacity as ongoing headwinds.