China March-25 CPI Inflation Report

Weak consumer demand keeps inflation subdued and continued deflation at producer price level

Gianluca Benigno

Apr 10, 2025

Key takeaways:

China's Consumer Price Index (CPI, non-seasonally adjusted) decreased by 0.1% year-on-year (YoY) in March, lower than the 0.7% YoY decrease recorded in February and the consensus forecast of 0% YoY change.
Core CPI (excluding all food and energy) increased by 0.5% YoY in March, up from the 0.1% YoY decrease recorded in February.
Consumer goods inflation fell by -0.4% YoY in March, in contrast to February’s 0.9 % YoY decline. Service inflation rose by 0.3% YoY, higher than the 0.4% YoY decrease in February.
The partial reversal of Food and Tobacco was the main factor contributing to the March’s less negative headline reading than February’s: Food and Tobacco declined by 0.6% YoY in March, compared to the 1.9 percent decline in February.
Producer Price inflation (all items) continued its deflationary trend in March, with a 2.5 % YoY decline, lower than the 2.2% YoY decline recorded in February and the 2.3% YoY decline in consensus forecast.
Overall, the data indicate that deflationary pressures have spread to the consumer level. Ongoing producer-level deflation continues to reflect persistent excess capacity in the economy. Looking ahead, the key driver of inflation dynamics will likely be the impact of tariffs. The sharp escalation in U.S. tariffs on Chinese goods—now at 125 % —could further intensify deflation at the producer level, with downstream effects that reinforce consumer price deflation.

Related Posts

China February -25 CPI Inflation Report (previous release)

China January-25 CPI Inflation Report (previous release)

China December -24 CPI Inflation Report (previous release)

Review of the Inflation Release

In March 2025, consumer prices decreased by 0.1% year-on-year (YoY), higher than the 0.7% YoY decrease recorded in February (see Chart 1) and higher than the consensus forecast of a 0% YoY change. On a month-to-month basis (MoM), consumer prices decreased by 0.4%, compared to February’s 0.2% MoM decline.

Core inflation (excluding food and energy prices) rose by 0.5% YoY in March, higher than the 0.1% YoY decrease observed in February. On a month-to-month (MoM) basis, it recorded a flat reading, compared to the 0.2% MoM decline in February.

A relevant split that is provided at the level of China’s release is the distinction between consumer goods and services. In March 2025, consumer goods dropped less than in the previous month, decreasing by 0.4% YoY after registering a decline of 0.9% YoY in February. On a monthly basis, consumer goods declined by 0.4% MoM, following February’s flat reading.

Service inflation rose by 0.3 % YoY in March after posting a 0.4 % YoY decrease in February. On a monthly basis, March saw a decrease by 0.4 % MoM in service inflation, slightly lower than February’s 0.5 % MoM decline.

Finally, in the case of China, we also report producer price indexes. Indeed, given China’s prominence in global manufacturing, producer prices provide a good indicator for thinking about global inflationary pressures at the goods level.

We report three categories:

All items
Means of production, and
Consumer goods

In March 2025, producer prices continued their long-running deflationary streak. Producer prices for all items declined by 2.5% YoY, following February’s 2.2% YoY decline. Similarly, producer prices (Means of Production) fell by 2.8% YoY in March – compared to the 2.5% YoY decline reported in February – indicating persistent lower input costs. Part of this decline can be attributed to a decrease in oil prices.

Finally, in March 2025, producer prices (consumer goods) declined by 1.5% YoY, following the 1.2% YoY decline recorded in February.

Summary

China’s inflationary outlook points to ongoing deflationary pressures at the consumer level and a persistent deflationary trend at the producer level. This combination reflects an economic environment of weak demand and excess capacity.

The U.S. administration’s recent decision to raise tariffs on Chinese imports to 125% presents a significant policy challenge, particularly in an environment already marked by deflationary pressures. While the controlled depreciation of the yuan may offer some cushion, it is unlikely to fully offset the impact.

A further decline in producer prices is therefore likely. To prevent these deflationary forces from deepening, additional policy support—whether fiscal, monetary, or targeted sectoral measures—will be necessary.

Table 1: CPI by components (% YoY)