China factory, investment data seen cementing modest growth recovery
BEIJING (Reuters) - China's factory output and investment may have gained steam in October as government pro-growth policy steps gain traction, a Reuters poll showed, limiting the chances of aggressive stimulus even as inflation stays benign.
The median forecast by 26 economists showed China's factory output in October probably grew 9.4 percent from a year earlier, accelerating from the annual pace of 9.2 percent in September and a three-year low of 8.9 percent in August.
A pair of manufacturing sector surveys on November 1 showed signs the economy began to perk up in October.
Annual growth in fixed-asset investment may have also quickened slightly to 20.6 percent in the first 10 months from 20.5 percent in the January-September period.
The government only publishes cumulative data on investment.
Annual growth in retail sales was expected to have eased a tad to 14 percent in October from September's 14.2 percent, according to the poll. Consumption has been holding up steady in recent months thanks to rising household incomes.
China's annual economic growth slowed to 7.4 percent in the third quarter from 7.6 percent in the second -- the seventh straight quarter of slower expansion, but signs of a modest rebound have emerged since September.
China annual GDP growth is expected to accelerate to 7.7 percent in the fourth quarter, according to a Reuters poll of analysts who expected the central bank to hold interest rates steady until 2013 but may still cut RRR once.
"Following a pick-up of growth momentum in September, October data will confirm that GDP growth may be on track to a modest recovery in Q4," said Tao Wang, China economist at UBS in Hong Kong.
"With economic recovery gradually taking shape, the need for more policy stimulus has diminished. We expect no major policy moves around the upcoming transition of senior leadership, with continued implementation of existing growth-supportive measures," she said in a note to clients.
Beijing has been following a programme of pro-growth fine-tuning of economic policies for a year and analysts broadly expect that to remain in place when a new leadership line-up of the ruling Communist Party is unveiled at a Congress this month.
The central bank has been fine tuning policy, including cutting benchmark interest rates twice in June and July and lowered bank reserve ratios three times since late 2011.
But it has been relying on large-scale cash injections into the banking system via its open market operations to support economic growth while retaining sufficient policy flexibility.
China's inflation looks tame, with consumer prices in October seen rising 1.9 percent from a year ago -- the same as in September and slightly higher than a 30-month low in July.
Analysts expected China's factory-gate prices in October to fall 2.7 percent from a year earlier, easing from September's 3.6 percent annual drop and boding well for the corporate sector struggling to cope with falling profits.
Chinese officials have recently flagged inflationary risks from the U.S. Federal Reserve's quantitative policy easing -- dubbed QE3 -- which has been fanning a fresh tide of hot money flows into emerging-market economies, including China.
A flare-up in China's property prices in recent months may have added to the central bank's policy caution, analysts say.
(Reporting by Kevin Yao; Editing by Jacqueline Wong)
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