China's Producer Price Index (PPI) for industrial products continued its gradual recovery in December 2025, with the year-on-year decline narrowing to -1.9%, according to latest data. This marks a steady improvement from the -2.2% recorded in November and continues a six-month trend of easing deflationary pressure, following lows of -3.6% in July 2025. On a month-on-month basis, the PPI rose 0.2%, indicating renewed pricing momentum at the factory gate as production activity stabilized ahead of the Lunar New Year.
The improving trajectory reflects a combination of stabilizing demand, policy support, and moderating input costs. The year-on-year contraction in production materials prices eased to -2.1%, while consumer goods prices declined more modestly at -1.3%, suggesting downstream sectors are experiencing relatively less pricing pressure than upstream industries.
Breaking down the components, production materials—a key driver of overall PPI movements—registered a month-on-month increase of 0.3% in December, signaling stronger industrial demand and restocking activity. This uptick may be attributed to government-backed infrastructure projects and improved manufacturing sentiment in high-tech and equipment-intensive sectors. Meanwhile, consumer goods prices remained flat on a monthly basis, rising 0.0% compared to November, indicating that demand-side inflation remains subdued despite seasonal factors typically boosting end-product prices toward year-end.
Analysts suggest that the narrowing annual decline in PPI is underpinned by both supply-side adjustments and incremental demand recovery. Capacity rationalization in heavy industries such as steel and cement has helped stabilize raw material prices, while targeted fiscal measures have supported investment in strategic manufacturing. Although deflationary pressures persist on a year-on-year basis, the consistent improvement since mid-2025 suggests the trough may have passed. Looking ahead, sustained domestic demand recovery and global commodity trends will be critical in determining whether PPI enters a sustained phase of reflation in early 2026.