China’s Consumer Prices Keep Rising After Holiday Spending Surge

China’s consumer prices rose during the first two months of the year as a longer-than-usual Chinese New Year holiday drove a surge in spending, though analysts cautioned that Beijing might need to implement stronger measures to boost demand to sustain the recovery.

The national consumer price index (CPI), a crucial gauge of inflation, rose by 0.8 per cent year on year during the January-February period, according to data released by the National Bureau of Statistics (NBS) on Monday.

Readings for the first two months are typically grouped together to reduce distortions from the Chinese New Year holiday, which fell in February this year but took place in January last year.

In February, consumer prices rose 1.3 per cent year on year – the largest monthly jump recorded in around three yearswhich the bureau largely attributed to the different timing of the extended break and a recovery in demand.

The monthly reading also beat market expectations for a 0.93 per cent increase, according to economists polled by financial data provider Wind, which did not provide a forecast for the January-February period.

But analysts expressed caution about the long-term outlook, with last month’s recovery partly driven by temporary factors such as Chinese New Year and rising tensions in the Middle East, which drove up oil prices.

“Whether this effect will be persistent beyond the holiday is not clear at this stage,” said Zhang Zhiwei, president and chief economist at Pinpoint Asset Management.

Huang Zichun, a China economist at Capital Economics, said the conflict in the Middle East would push global energy prices and inflation higher for the time being, but suggested that China’s deflationary pressures might return unless Beijing offered further policy support.

The measures to boost domestic demand outlined by Chinese officials last week at the National People’s Congress – the annual meeting of China’s top legislatureand in Beijing’s new five-year plan were “disappointing”, Huang said, meaning “any inflationary pickup will unwind once tensions ease”.

Zhang expressed similar concerns, warning that Beijing might need to implement a “more proactive” fiscal policy to navigate rising stagflation risks and global economic uncertainty if the war in Iran continued to escalate. China has been grappling with low inflation for years, with sluggish domestic demand and persistent oversupply weighing on prices. The CPI stayed flat in 2025, though there were signs of progress towards the end of the year as the index rose 0.8 per cent in December.

Beijing has signalled stronger action to raise demand and boost inflation this year. In December, policymakers said ensuring stable growth and a reasonable recovery in prices would be the “key consideration in monetary policy” for 2026. Last week, officials set an inflation target of 2 per cent for 2026 – in line with last year’s figure.

Officials have already launched a range of measures to spur household spending and curb industry price wars. Recent actions include an extension of China’s huge consumer goods trade-in programme and an action plan to curb overproduction in the steel industry.

In the first two months of 2026, core inflationa metric that excludes volatile food and energy prices – grew 1.3 per cent from a year earlier, according to the bureau. Consumer goods prices were up 0.7 per cent, while service prices rose 0.8 per cent. Food prices were up 0.5 per cent.

The CPI also recorded its largest month-on-month rise in nearly two years in February, “mainly driven by the longer Chinese New Year holiday, which concentrated consumer demand and pushed service prices higher than seasonal norms”, said Dong Lijuan, chief statistician at the bureau.

Meanwhile, the long decline in China’s factory-gate prices continued to narrow, suggesting that Beijing’s efforts to rein in excessive “involutionary” competition in a slew of industries may be starting to pay off.

The producer price index (PPI)a measure of factory-gate pricesfell 0.9 per cent year on year in February, compared with a 1.4 per cent contraction the previous month. Wind had forecast a 1.45 per cent decline.

The PPI has now been contracting for 41 consecutive months in year-on-year terms. However, there were positive signs in February as the index rose 0.4 per cent month on month – a fifth consecutive monthly increase.

Zhang said the PPI was likely to continue improving at least in March, given the developments in the Middle East.

The statistics bureau, meanwhile, has recalibrated the way it calculates China’s consumer price index – a move designed to shift the focus towards services and emerging consumption categories and away from food and housing.

The weight of food in the CPI basket was reduced to 17.2 per cent and housing to 22.1 per cent under the new system, the bureau announced last month. Transport and communications rose to 14.3 per cent, education, culture and entertainment to 11.4 per cent, and healthcare to 8.9 per cent.