Chinese deflation eases, but consumption concerns persist
By Benjamin Chiou
Date: Wednesday 15 Oct 2025
(Sharecast News) - Chinese consumer prices fell more than expected in September amid sluggish demand and the sharpest decline in food prices in 20 months, while factory gate deflation continued into its third year.
The year-on-year change in the consumer price index was -0.3% last month, following a 0.4% decline in August, according to the National Bureau of Statistics. This was lower than the 0.1% fall expected by analysts.
Food prices were 4.4% lower than a year before after a 4.3% decline in August - the steepest drop since January 2024. Non-food inflation picked up to 0.7% from 0.5%, while transport price deflation eased to -2.0% from -2.4%.
Core inflation, which strips out volatile items like food and energy, picked up to a 19-month high of 1.0% from 0.9% previously, though still a relatively benign rate of growth.
Meanwhile, producer prices fell at a year-on-year rate of 2.3%, after dropping 2.9% in August, in line with economists' predictions. This was the lowest rate of factory gate deflation in seven months but the 36th straight month of falling producer prices.
"It's the longest cold spell since China first cracked open its markets in the late 1970s, and it's wearing down everything that grows in the system - profits, confidence, and policy patience," said Stephen Innes, managing partner at SPI Asset Management.
Even the core PPI rate excluding food and energy came in at just +1.0% - "not the kind of readings that light fires in factory furnaces", Innes said.
"Deflation in China isn't a number anymore; it's a mood, a cultural climate. It's the sense that prices fall because hope does. When shoppers expect next month's goods to be cheaper, they wait. When firms expect next quarter's sales to be weaker, they cut. When investors expect policymakers to wait out the storm rather than fight it, they hedge - not for risk, but for boredom."
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