China's consumer prices creep up in October

China's consumer prices returned to growth in October after falling for two straight months, while the decline in factory-gate prices continued to narrow in October, official data showed Sunday.

Data from the National Bureau of Statistics showed that China's consumer price index, the main gauge of inflation, rose 0.2 percent year-on-year in October, following a 0.3 percent drop in September.

The increase suggests a gradual pickup in domestic demand and business activity as Beijing steps up policy support to shore up growth through to the end of the year.

Analysts said that while short-term holiday effects will fade, the continued rise in core inflation and the narrowing declines in factory-gate prices point to strengthening underlying demand and early signs of a broad-based rebound.

Looking to the fourth quarter, they said China's economy is expected to maintain a steady recovery, supported by stronger policy stimulus and gradual improvements in consumption and industrial activity.

The core CPI — which excludes volatile food and energy prices and is viewed as a better gauge of supply-demand dynamics — rose 1.2 percent year-on-year in October after a 1 percent increase in September, marking the sixth consecutive month of expansion and the highest rise since February last year.

"The CPI rebound reflects both a short-term holiday-driven boost and a longer-term improvement in domestic demand," said Tang Guanghua, an analyst at Shenyin & Wanguo Futures Co.

Tang said that the steady rise in core CPI for the past six months highlights the effectiveness of policies aimed at boosting domestic demand and driving consumption upgrading. "It shows that the intrinsic drivers of demand recovery are accumulating," he said.

On the industrial side, Tang said the monthly rise and narrowing annual decline in factory-gate prices mark "a clear inflection point in the strong recovery of the industrial sector".

He attributed the improvement to both policy stimulus and industrial upgrading, especially improving supply-demand dynamics in photovoltaics and semiconductors, as well as government efforts to curb rat-race competition.

According to the NBS, China's producer price index — which measures factory-gate prices — fell 2.1 percent year-on-year in October, easing from a 2.3 percent drop in September. On a month-on-month basis, the PPI increased 0.1 percent in October after remaining flat in September.

"The combination of a positive month-on-month reading and a narrowed year-on-year decline signals that industrial recovery has entered an acceleration channel," Tang said, adding that the PPI is expected to stage a strong rebound as policy effects continue to unfold.

Feng Lin, executive director of the research and development department at Golden Credit Rating International, said the current price level remains generally stable and slightly low, leaving ample room for monetary and fiscal policy to continue supporting consumption and offsetting external volatility.

Feng said she expects the November CPI to rise further to around 0.6 percent year-on-year as food price declines continue to narrow and consumption-boosting policies strengthen. "This low-inflation environment provides sufficient space for growth-stabilizing policies, including a possible moderate rate cut by the central bank before year-end," she said.

Deutsche Bank recently raised its forecast for China's fourth-quarter GDP growth by 0.2 percentage points to 4.6 percent year-on-year, and lifted its full-year growth projection to 5 percent, suggesting the country remains on track to achieve its annual growth target of around 5 percent in 2025.

Xiong Yi, chief economist for China at Deutsche Bank, said he expects more fiscal support in the fourth quarter.

"An additional 500 billion yuan ($70.2 billion) through new policy-based financial instruments will be directed toward key investment projects, while another 500 billion yuan within the local government debt ceiling has been allocated to strengthen local governments' fiscal capacity," he said. "That will provide a strong boost in the fourth quarter and early 2026."

The bank expects a 50-basis-point cut in the reserve requirement ratio in December, followed by another reduction around mid-2026.