China’s consumer inflation accelerated in December to the fastest pace in nearly three years as spending picked up ahead of the New Year holiday, while factory-gate deflation remained entrenched, signaling that underlying demand stayed weak.

Consumer prices rose 0.8% from a year earlier, their highest level since February 2023, according to data from the National Bureau of Statistics on Friday. The improvement followed a 0.7% climb in November and matched the economists’ expectations in a Reuters poll.

The rebound in consumer prices was largely driven by fresh vegetables, which rose 18.2% from a year earlier due to supply shortages during the cold winter. Among other food items, pork prices fell 14.6%.

Core inflation, which excludes volatile prices of food and energy, was up 1.2% year on year in December, unchanged from the growth in the prior month.

On a monthly basis, consumer prices grew 0.2%, above the expected 0.1% gain in a Reuters poll.

Still, for 2025 as a whole, the inflation gauge was flat, missing the official target of “around 2%,” signaling that Beijing’s stimulus measures implemented so far, including a consumer goods trade-in program, have done little to boost demand.

Producer prices dipped 1.9% in December from a year earlier, better than the forecast 2% decline, extending the deflationary streak beyond three years. The drop moderated from a 2.2% fall in November, partly due to higher prices for non-ferrous metal materials.

Prices for durable consumer goods dropped 3.5% from a year earlier.

Lijuan Dong, chief NBS statistician, said that gold jewelry prices surged 68.5% year on year in December, driven by a global rush into the precious metal amid recession fears and market uncertainty.

The Wall Street bank said the contraction in fixed-asset investment likely deepened in December, dropping around 11.8% from a year earlier, compared with an 11.1% decline in November. Industrial production growth is estimated to have edged up to around 4.9%, supported by a pickup in manufacturing activity and the “usual year-end acceleration in output.”

China’s manufacturing activity unexpectedly expanded in December, snapping a record eight straight months of decline. The official purchasing managers’ index (PMI) rose to 50.1 from 49.2 in the prior month, above the 50-point threshold separating growth from contraction.

At a key economic policy-setting meeting in early December, the ruling Communist Party leadership reiterated plans to boost consumption and stabilize the property market, although similar pledges in the past have failed to deliver meaningful results.

A recent article published by the Communist Party’s flagship magazine Qiushi Journal called for the “implementation of a stronger, comprehensive package of measures to stabilize the real estate sector, rather than through piecemeal-style approach.”

The government may roll out more easing measures in the near term, including cutting mortgage rates and easing home purchase restrictions, said Macquarie’s Hu. However, these measures may not be “forceful enough to reverse the trend,” Hu warned, estimating new home sales in floor space to fall by 7% in 2026 after an 8% decline in 2025.

Chinese policymakers have also stepped up efforts to curb intense price wars that have hurt businesses’ profitability and ordered a production cut in some sectors to rein in oversupply.

Still, industrial firms saw their profits drop 13.1% year-on-year in November, their steepest drop in over a year.

Carmakers in the country have rolled out a new round of price cuts and perks at the start of this year as demands remained sluggish and the government withdrew part of a tax incentive for eligible electric vehicles.

Factory-gate prices in the automaking industry dropped 2.8% in 2025. In December, prices for gasoline-powered and new energy vehicles fell 2.4% and 2.2% from a year earlier, respectively, according to official data.