SCIO briefing on China's economic performance in August 2025

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In August, the CPI fell year on year, with food price changes having a significant impact. Meanwhile, the year-on-year increase in core CPI has expanded for the fourth consecutive month. What are the underlying factors behind this? What is your outlook for future trends? Thank you.

Fu Linghui:

Thank you for your question. In August, the CPI was flat month on month and shifted from flat to a year-on-year decrease. This was influenced by factors such as ample market supply and a higher base in the same period last year.

On a month-on-month basis, the CPI was unchanged in August, compared to a 0.4% increase last month. Within this, food prices rose 0.5%, while non-food prices fell 0.1%. Among food items, the prices of fresh vegetables and eggs increased by 8.5% and 1.5%, respectively, collectively pushing the CPI up by 0.17 percentage point. Meanwhile, prices of fresh fruit, aquatic products, and pork declined by 2.8%, 0.9% and 0.5% month on month, respectively, which together pulled the CPI down by 0.09 percentage point. In the non-food category, transportation and communication prices dropped 0.3%, while prices for clothing, household goods and services, and education, culture, and entertainment all decreased by 0.1%.

From a year-on-year perspective, the CPI in August fell by 0.4%, compared to flat growth in the previous month. The shift in consumer prices from flat to a decrease year on year was primarily due to a higher comparison base from the same period last year. In August 2024, food prices rose sharply due to extreme heat and localized heavy rainfall, driving up overall consumer price growth and creating a higher base that contributed to this year's CPI decline. In August this year, food prices fell 4.3% year on year, a drop that widened by 2.7 percentage points from July, pulling down the CPI by 0.51 percentage point. Pork, fresh vegetables and eggs all fell by more than 10% year on year.

While the overall CPI declined in August due to the larger drop in food prices, core CPI, which excludes food and energy, rose 0.9% year on year. This marked an acceleration of 0.1 percentage point from the previous month and the fourth consecutive month of accelerating growth. This suggests positive price trends are continuing to build. The uptick in core CPI was primarily driven by rising prices for industrial consumer goods and services.

First, price increases for industrial consumer goods accelerated. Since the beginning of this year, consumer goods trade-in policies have been strengthened and expanded, while efforts to regulate disorderly competition among enterprises have progressed steadily, improving supply-demand dynamics in industrial consumer goods and driving up prices. The price of industrial consumer goods excluding energy rose by 1.5% year on year in August, up 0.3 percentage point from July. Among these, the prices of household appliances and recreational durable goods rose 4.6% and 2.4% year on year, respectively, jointly contributing about 0.09 percentage point to CPI growth. Meanwhile, the year-on-year decline in gasoline vehicle prices continued to narrow. 

Second, service prices saw a steady rise. With targeted measures to boost consumption in full swing, summer travel and cultural tourism demand heated up, while demand for high-quality social services expanded, driving the rebound in service prices. In August, service prices rose 0.6% year on year, 0.1 percentage point faster than in July, contributing about 0.23 percentage point to CPI growth. Since the beginning of the year, service prices have generally maintained a stable upward trend. Specifically, prices for medical and educational services rose by 1.6% and 1.2% year on year, respectively, while vehicle rental and tourism prices increased by 0.8% and 0.7%, respectively, with all categories showing widening growth rates.

However, it is also important to note that market supply-demand imbalances remain prominent, and consumer prices are still operating at low levels. Looking ahead, we must continue to expand domestic demand, effectively implement targeted campaigns to stimulate consumption, sustain growth in effective investment, further advance construction of a unified national market, and strengthen capacity management in key industries to promote a reasonable recovery in prices. Thank you.