China saw consumer inflation pick up in February, with prices rising at the fastest yearly pace in about three years as Lunar New Year spending gave demand a lift.

Data released Monday by the National Bureau of Statistics showed China’s consumer price index rose 1.3% from a year earlier in February. That was stronger than the 0.93% increase expected by economists polled by Wind.

For the first two months of 2026, China’s CPI rose 0.8% from a year earlier. Officials usually combine January and February readings to smooth out holiday effects because the Lunar New Year moved around the calendar.

This year, the holiday fell in February. Last year, it came in January.

Holiday demand pushes consumer prices higher across China

The February increase was the biggest yearly rise in monthly consumer prices in roughly three years. That matters because China has spent years dealing with very low inflation.

In 2025, the CPI was flat for the full year, though there were signs of life near the end as the index rose 0.8% in December.

The latest breakdown showed price gains across several categories in the first two months of the year. Core inflation, which strips out food and energy, rose 1.3% from a year earlier. Consumer goods prices climbed 0.7%. Service prices were up 0.8%. Food prices increased 0.5%.

Analysts said stronger policy support may be needed if officials want demand to keep improving after the holiday boost fades.

In December, policymakers said keeping growth stable and bringing prices back to a reasonable level would be the “key consideration in monetary policy” for 2026.

Last week, PBOC officials set an inflation target of 2% for 2026, the same target used a year earlier.

Energy buffers soften oil shock risks for China’s economy

The picture was different on the production side. China’s producer price index, which tracks factory-gate prices, fell 0.9% in February from a year earlier.

That was a smaller drop than the 1.4% decline recorded in the previous month. It was also better than Wind’s forecast for a 1.45% fall.

Even with that improvement, the pressure on manufacturers has not gone away. The PPI has now been in yearly contraction for 41 straight months. Still, one monthly detail looked better.

In month-to-month terms, the index rose 0.4% in February. That was the fifth consecutive monthly increase, which suggests factory prices have stopped falling as sharply as before.

At the same time, global energy markets have turned more volatile after the Iran war pushed oil above $100 a barrel for the first time in four years. Analysts at OCBC said China may be “less sensitive to a prolonged closure of the Strait of Hormuz than many of its Asian peers.”

They said China has built “one of the world’s largest strategic and commercial crude reserves” and that its rapid shift toward electric vehicles and renewable energy gives it “an additional structural hedge.”

As of January, China held an estimated 1.2 billion barrels of onshore crude stockpiles. By 2030, the country wants non-fossil fuels to make up 25% of total energy use, up from 21.7% in 2025.

The Strait of Hormuz links the Persian Gulf to the Arabian Sea and major shipping lanes, with Iran on one side and Oman and the United Arab Emirates on the other.

About 31% of the world’s seaborne oil flows, or roughly 13 million barrels a day, passed through that route last year, Kpler said.

For China, oil shipments through the strait make up only 6.6% of total energy consumption, while gas imports through the same route account for another 0.6%.

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