China inflation rises as Lunar New Year spending boosts consumer prices

China’s consumer inflation climbed in February, marking the strongest annual increase in more than three years as extended Lunar New Year celebrations lifted spending across travel, dining, and leisure services.

Data released Monday by the National Bureau of Statistics showed consumer prices rising faster than economists expected, signalling a temporary boost to demand during the holiday period.

Factory-gate deflation also moderated as rising commodity prices helped stabilise industrial costs.

The figures come as policymakers attempt to revive domestic consumption while managing slower growth and geopolitical risks affecting commodity markets.

Holiday demand lifts prices

China’s consumer price index rose 1.3% in February from a year earlier.

The increase followed a modest 0.2% rise in January.

According to LSEG data, the February reading marked the fastest annual inflation increase since January 2023.

On a monthly basis, consumer prices rose 1%, exceeding economists’ expectations for a 0.5% increase.

Core inflation, which excludes volatile food and energy costs, climbed 1.8% from a year earlier.

Data compiled by Wind Information showed this matched the strongest pace since March 2019.

Service prices were a major driver of the increase.

Prices in the sector rose 1.1% year on year, contributing 0.54 percentage points to headline inflation.

Higher demand for travel, pet care, vehicle maintenance, movie tickets, and dining services during the holiday period pushed service costs higher.

This year’s Lunar New Year holiday ran from Feb. 15 to Feb. 23, the longest celebration on record.

The holiday lasted eight days last year.

Factory deflation slows

China’s producer price index continued to decline in February, though the pace of deflation eased.

Factory-gate prices fell 0.9% from a year earlier, better than economists’ expectations of a 1.2% decline.

The reading marked the slowest pace of producer price deflation in more than a year.

Rising prices for metals and commodities helped stabilise factory prices.

Prices for silver refining rose 16.9%, while gold refining increased 8.4%.

Oil and gas extraction prices climbed 5.1%.

Gold jewellery prices increased 6.2% in February, while gasoline prices rose 3.1%.

Policy targets and weak demand

Despite the rebound in consumer prices, policymakers remain cautious about domestic demand.

China maintained its annual inflation target at around 2% for 2026 during a key economic policy meeting last week.

The target, first introduced in 2025, represents the lowest inflation goal in more than two decades.

Consumer prices were flat overall in 2025, while core inflation rose 0.7% as consumer confidence remained weak.

Authorities also lowered the official GDP growth target to a range of 4.5% to 5%, the least ambitious goal since the early 1990s.

Stimulus and global risks

Chinese authorities are continuing to support consumption through fiscal measures.

The government allocated 250 billion yuan, or about $36.2 billion, for consumer trade-in subsidies in this year’s fiscal budget.

This compares with 300 billion yuan allocated in 2025.

Officials also created a 100 billion yuan government fund designed to support private investment and consumer spending.

Geopolitical tensions have added pressure on commodity prices.

The ongoing conflict in the Middle East pushed up gold jewellery and gasoline prices in China during February.

Higher commodity prices may continue influencing producer prices in the coming months.