China consumer prices jump on holiday boost; factory-gate deflation lingers

National holiday lifts consumer prices Producer deflation persists even as downturn eases slightly Policymakers vow to address supply-demand mismatch BEIJING, March 9 (Reuters) - China’s consumer inflation accelerated to the highest in more than three years due to the effects of the Lunar New Year holiday, while producer deflation persisted as weak demand remained a drag on an economy facing stiff external challenges. Policymakers have been trying to boost consumption over the past two years, but analysts say more needs to be done to address the supply-demand imbalance. The consumer price index (CPI) rose 1.3% year-on-year for the fifth straight month of gains and outpaced the 0.2% increase in January, data from the National Bureau of Statistics (NBS) showed on Monday. The pace beat an expected 0.8% rise in a Reuters poll. A nine-day Lunar New Year holiday boosted domestic travel and consumer spending, lifting the headline CPI reading as services price surged. The holiday period last year was one day shorter and started in late January. Core CPI, which excludes volatile prices of food and fuel, rose 1.8% year-on-year last month, compared with the 0.8% rise in January. On a monthly basis, CPI increased 1%, compared with a 0.2% rise in January and an expected increase of 0.5%. The economy has been beset by a years-long property market slump and external trade uncertainties, with protectionist U.S. policies posing fresh challenges to policymakers. Beijing has vowed to keep cracking down on excessive competition and ensure smoother exit of inefficient production capacity in order to stabilise prices. However, the deflationary impulse across the economy continues to exert margin pressure on the manufacturing sector, while underpinning expectations of sustained price falls in a further blow to confidence. There was a modicum of relief in the latest data, however. The producer price index (PPI) recorded the smallest year-on-year drop since July 2024, having fallen 0.9% in February. It declined 1.4% the previous month, and economists polled by Reuters had expected a 1.2% drop. NBS statistician Dong Lijuan attributed the milder producer deflation to factors including stronger prices in advanced and emerging sectors as well as capacity management in key industrial sectors, according to a statement. Beijing is aiming for GDP growth of between 4.5% and 5% for the year, slower than the previous year’s “around 5%”, signalling willingness to accommodate reforms that could help the economy reduce its reliance on external demand. In a report presented at the annual parliamentary meeting, Chinese Premier Li Qiang reiterated that driving “an appropriate rebound” in prices was one of the key considerations for monetary policy. The government’s CPI target for 2026 remained unchanged at “around 2%”, a goal that China’s state planner said was “conducive to guiding public expectations and boosting market confidence while also leaving room for macro regulation and further reforms”. China has not achieved its annual CPI goals for years.