China’s inflation rate dipped to 0.1% in December 2024, down from 0.2% in November and aligning with market expectations. This marked the lowest inflation rate since March, reflecting persistent deflationary pressures despite government stimulus measures and the central bank’s accommodative monetary policies. The data highlights challenges for China’s economy as it struggles to stimulate demand and sustain growth.

Food Prices Decline After Months of Increases

Food prices fell by 0.5% in December, reversing a four-month streak of increases, which included a 1.0% rise in November. The decline in food costs played a significant role in driving down overall inflation, signaling reduced consumer demand in key segments. This downward trend suggests that despite efforts to boost spending, households remain cautious amid economic uncertainty.

Non-Food Prices Show Modest Gains

Non-food prices provided a slight counterbalance to the decline in food prices, rising by 0.2% after showing no change in November. Key contributors to this increase included a rebound in housing costs (0.1% vs. -0.1%), stable growth in healthcare (0.9% vs. 1.1%), and education (0.9% vs. 1.0%), as well as a slower decrease in transport costs (-2.2% vs. -3.6%). Core consumer prices, which exclude volatile food and energy costs, rose 0.4% year-on-year, marking the fastest pace of growth in five months and signaling underlying stability in some sectors.

Read More: China Retail Sales

Year-End Inflation Reflects Ongoing Challenges

On a monthly basis, the consumer price index (CPI) remained flat in December, following a steep 0.6% drop in November, which was the sharpest monthly decline in eight months. For the entirety of 2024, consumer prices increased by just 0.2%, matching the subdued inflation pace of 2023. These figures underscore the difficulties China faces in achieving sustained economic momentum, with deflation risks looming despite policy interventions aimed at fostering recovery.

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