China’s fight against deflation is far from over as the latest official data for September 2025 shows continued price declines. The Consumer Price Index (CPI) fell 0.3% year-on-year, reflecting subdued domestic demand and falling food prices. The drop, while smaller than August’s 0.4% decline, exceeded market expectations of a 0.1% fall. Meanwhile, factory-gate prices (Producer Price Index, PPI) dropped 2.3% from a year earlier, extending an unprecedented 36-month streak of deflation for Chinese manufacturers.
Food prices were a major drag, sinking 4.4% year-on-year— the steepest drop since early 2024 — as plentiful supply and weak demand, particularly for pork, put downward pressure on costs. In contrast, non-food inflation accelerated to 0.7% as government incentives and trade-in programs pushed up spending on housing, clothing, healthcare, and education. Core inflation (which excludes food and energy) rose 1.0%, the highest in over a year and a half, indicating some underlying consumer resilience.
Service inflation held steady at 0.6%, while transport and communications costs continued to fall, down 2.0%. On the production side, costs for manufacturing inputs fell but at a slower pace, hinting at persistent but easing pressures on industrial profit margins.
To spur the economy, China has rolled out more incentives for consumers and tax breaks for businesses, but analysts say more policy action may be needed to restore momentum and tackle deflation concerns.
With deflationary pressures sticking around, China’s economic recovery remains patchy and in need of further support to regain confidence and growth.
