China: rapid rise in PPI may complicate policy choices - Nomura

Analysts at Rabobank expect PPI inflation to peak in Q1 at around 7%.

Key Quotes:

"PPI jumped to 5.5% y-o-y in December and CPI inflation moderated slightly to 2.1% y-o-y. We have revised up 2017 PPI forecast to 4.4% and CPI forecast up to 2.6%.

Rapid PPI inflation is being driven mainly by inflation in upstream sectors. Price increases in downstream sectors also accelerated, albeit not by as much.

The combination of rising inflation and headwinds to economic growth may further complicate macro policy with an increasing risk of monetary policy mismanagement."