China's inflation slowed in January 2026, but core prices rose, signaling stabilizing demand despite ongoing deflationary pressures.

China's consumer prices rose 0.2% year-on-year in January 2026, slowing from December’s 0.8% increase and falling short of forecasts, driven by base effects from last year’s early Chinese New Year and a 5.0% drop in energy prices. Core inflation eased to 0.8% from 1.2%, though monthly core CPI rose 0.3%, the fastest in nearly six months, signaling improving underlying demand. Meanwhile, producer prices declined 1.4% annually, narrowing from December’s 1.9% drop, with the fourth consecutive monthly gain in the PPI, supported by stronger demand in AI-related sectors, a unified national market, and higher global commodity prices. Deflation remains a concern, with weak domestic demand and overcapacity persisting, prompting continued policy support.