Holiday Travel and Services Lift CPI by 0.2%, Yet Economists Warn Inflation Boost Is Temporary as Growth Momentum Slows

China’s consumer prices rose unexpectedly in October, snapping two months of declines as seasonal spending during national holidays lifted demand for travel, food, and transport. But analysts warn the rebound is short-lived, underscoring the fragile nature of the country’s post-pandemic recovery and the continued risk of deflation.

According to data released Sunday by the National Bureau of Statistics (NBS), the Consumer Price Index (CPI) increased 0.2% year-on-year, reversing September’s 0.3% decline. The figure beat the median estimate of economists surveyed by Bloomberg, who had expected a 0.1% drop, signaling a brief reprieve from deflationary pressures.

The core CPI, which excludes food and energy, rose 1.2%, reflecting moderate underlying demand. Meanwhile, service costs climbed 0.2%, rebounding from a 0.3% fall the previous month, as the Golden Week holidays spurred travel and leisure activities.

“Consumer prices swinging back to inflation reflect a holiday boost that will fade,” said Eric Zhu, senior economist at Bloomberg Economics. “In other words, deflationary pressures remain entrenched — and weaker growth in the fourth quarter means there’s little to change the trend.”

Deflationary Cycle Still Threatens Broader Recovery

Despite October’s uptick, economists caution that China’s underlying price environment remains weak, with consumer and business sentiment subdued. The Producer Price Index (PPI) — a measure of factory-gate prices — fell 2.1% year-on-year, easing from a 2.3% decline in September but still marking the 37th consecutive month of contraction.

Persistent factory-gate deflation reflects lower industrial profits and muted demand across supply chains, particularly in construction, energy, and manufacturing. Falling input costs, while providing temporary relief for producers, also highlight the lack of pricing power in an economy where overcapacity and cautious spending continue to dominate.

Deflation poses a critical challenge to Beijing’s policymakers. When consumers and businesses expect prices to stay low, they delay spending and investment, amplifying a downward spiral of slower growth, thinner margins, and rising debt burdens.

“The longer deflation persists, the harder it becomes to reignite domestic demand,” said Dr. Lin Xuelian, an economist at Renmin University. “Households remain risk-averse, and private investment hasn’t recovered to pre-pandemic levels. The price rebound doesn’t signal a turning point — it’s a brief holiday distortion.”

Policy Dilemma: Stimulus vs. Stability

The Chinese government has made reversing deflation a policy priority, launching measures to bolster domestic demand and stabilize corporate margins. Among them is the “anti-involution” campaign, aimed at curbing destructive price wars across industries such as electric vehicles, food delivery, and e-commerce — sectors that have slashed prices aggressively to maintain market share.

Yet progress has been uneven. Officials have so far refrained from large-scale stimulus, wary of reigniting debt risks after years of heavy infrastructure and property spending. The People’s Bank of China (PBOC) has instead focused on targeted liquidity injections and modest rate cuts to support small businesses and local governments.

“Beijing is walking a fine line,” said Xiang Tan, chief economist at Nomura China. “It wants to boost confidence without fueling new bubbles in real estate or shadow finance. But without a clear fiscal push, disinflation could persist well into next year.”

China’s nominal GDP growth — the broadest indicator of economic activity — has been hampered by falling prices even as real GDP remains on track to meet the government’s 5% annual target. The GDP deflator, which tracks changes in the overall price level of goods and services, has declined for eight consecutive quarters, the longest stretch since quarterly data began in 1993.

Outlook: Fragile Gains and Structural Headwinds

Economists widely agree that October’s CPI rebound reflects temporary factors tied to the Mid-Autumn Festival and National Day Golden Week, rather than a structural recovery in household demand. As holiday effects fade, inflation is expected to flatten or turn negative again in November and December.

The government’s official consumer inflation target of around 2% — already the lowest in more than two decades — remains out of reach, with full-year inflation projected near zero. Analysts say that without stronger wage growth, fiscal stimulus, or consumer incentives, China could face a prolonged period of near-stagnant prices, undermining its growth momentum into 2026.

“The real risk is complacency,” Zhu warned. “If policymakers treat this CPI rebound as proof of normalization, they’ll miss the deeper story — China is still flirting with deflation.”