Analysis of China’s November 2025 CPI Recovery and Persistent PPI Deflation

This analysis is based on China’s November 2025 inflation data released by the National Bureau of Statistics on December 10, 2025 (04:55 UTC+8), as reported by the Wall Street Journal [1] and Yahoo Finance [2][3]. The data reveals a divergent inflation trend: the Consumer Price Index (CPI) recovered to 0.7% year-over-year (YoY), matching market expectations and up from October’s 0.2% YoY increase. However, the Producer Price Index (PPI) fell 2.2% YoY, worsening from October’s -2.1% and missing consensus forecasts of -2.0% [2][3].

A breakdown of CPI shows non-food prices (up 0.8% YoY) contributed more than food prices (up 0.2% YoY), indicating a broader recovery in consumer demand beyond volatile food items [0]. In contrast, the deepening PPI deflation reflects persistent weak industrial demand and excess capacity in certain sectors, which squeezes corporate margins by reducing factory-gate prices [0].

Short-term market impacts are expected to be sector-specific: consumer stocks (food, retail, services) may see mild gains due to improving consumer sentiment, while industrial and upstream sectors (manufacturing, mining, steel) face pressure from worsening PPI deflation [1]. The USD/CNY exchange rate may experience short-term volatility, with the worse-than-expected PPI potentially weighing on the yuan, offset by the stable CPI which limits depreciation [3].

Medium-term, persistent PPI deflation could lead to declining earnings in industrial sectors over the next 3-6 months. The data may reinforce the People’s Bank of China (PBOC)’s cautious stance: while the CPI pickup reduces deflationary concerns, the PPI weakness signals ongoing industrial demand issues, keeping the door open for potential stimulus measures [0].

1. Uneven Economic Recovery
   : The divergence between CPI recovery and PPI deepening highlights an uneven economic rebound, with consumer demand improving but industrial sector weakness persisting.
2. Non-Food CPI Significance
   : The stronger contribution from non-food CPI (0.8% YoY) suggests a broader recovery beyond volatile food prices, which is a more reliable indicator of underlying demand trends.
3. Policy Uncertainty
   : While the CPI recovery eases deflationary fears, the unexpected PPI miss may prompt the PBOC to reassess its monetary policy, creating uncertainty in the medium term.
4. Critical Information Gaps
   : The absence of core CPI data (excluding food and energy) limits a full assessment of underlying inflation trends, making follow-up data releases essential for a complete analysis [0].

• Opportunities
  : Consumer sectors may benefit from the CPI recovery, as improving consumer demand could boost sales and margins [1].
• Risks
  :
  • Industrial sector debt risks
    : Persistent PPI deflation may strain highly leveraged industrial companies, increasing the likelihood of debt-related issues [0].
  • Economic recovery risks
    : The mixed data suggests an unstable rebound, with industrial weakness potentially dragging on overall economic growth [3].
  • Market volatility
    : The unexpected PPI miss could trigger short-term volatility in Chinese stocks and the yuan when markets open [2].

China’s November 2025 inflation data presents a mixed economic signal: CPI recovered to 0.7% YoY (driven by non-food prices), while PPI deflation deepened to -2.2% YoY (worse than expected). Short-term market reactions are expected to be sector-specific, with consumer stocks potentially gaining and industrial sectors facing pressure. Medium-term risks include industrial profit declines and an uneven recovery, while the PBOC’s policy response remains a key factor to monitor. Stakeholders should track core CPI data, real-time market reactions, commodity prices (sensitive to industrial demand), and upcoming PBOC policy announcements for a clearer economic outlook.