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BEIJING (Reuters) - China's recovery from its slowest period of growth since early 2009 likely strengthened in October and data due on Friday could cement investor expectations of a burgeoning cyclical rebound.
Fixed asset investment and industrial production growth are the key numbers to watch in Friday's flurry of releases - which also include consumer and producer price inflation as well as retail sales - as they are barometers of both domestic activity and output from China's export-oriented factory sector.
If the read-outs offer more evidence supporting a rebound in the final three months of 2012, it could be the point at which investors who have been bearish on China after seven successive quarters of slowing annual growth decide to throw in the towel.
"There's a lot of attention on this batch of data," Zhang Zhiwei, Hong Kong-based chief China economist at Nomura, said.
"It's the first month of a new quarter which means that if this data is strong, investor expectations may change as a result of it," Zhang told Reuters, adding that he thinks October saw a 10 percent year-on-year jump in industrial output.
That's well above the 9.4 percent Reuters poll consensus forecast, itself an increase on the 9.2 percent growth achieved in September that - along with a tick higher to 20.5 percent in year-to-date fixed asset investment growth - analysts see as flagging a potential turning point for China's economy.
Chinese stocks have shown signs of bottoming since plumbing three-year lows in late September, with the CSI300 Index of top Shanghai and Shenzhen listed shares gaining 5.3 percent - although the rally has been capped by concerns that September's data alone does not warrant unbridled optimism.
China equity analysts at Citi believe a cyclical rally will gain momentum, fuelled by a combination of improving data and prospects of structural economic reform, after China's Communist Party completes its once-a-decade handover of power.
"The recent rebound may suggest that the economic downturn is turning around in Q4," they wrote in a note to clients. "We expect another 10 percent or more market gain before year-end."
The consensus view among economists is that a seven-quarter long cyclical downturn in China's growth ended in Q3, when it dipped to 7.4 percent year-on-year.
A tepid rebound to 7.7 percent is anticipated in Q4, with its mild nature restraining many investors from making aggressive turnaround bets, as evidenced by 10 of the 27 analysts polled by Reuters having forecasts below the median.
Doubts linger meanwhile about the reliability of external demand - exports were worth about 31 percent of Chinese GDP in 2011, according to the World Bank, with the external sector supporting an estimated 200 million jobs - despite a pair of manufacturing sector surveys on November 1 that signalled the economy began to perk up last month.
"The overall picture was one of stabilisation rather than a strong rebound in external demand," Yao Wei, chief China economist at Societe Generale in Hong Kong, wrote in a note to clients.
Domestic demand, while strong, has not fully compensated for a decline in demand from struggling developed economies. Analysts expect retail sales growth to have eased a tad to 14 percent year-on-year in October from September's 14.2 percent - another sign of steady, if unspectacular growth.
Beijing has been fine-tuning economic policy for a year to support growth, and analysts expect that programme to broadly remain in place after a new leadership of the ruling Communist Party is unveiled at a congress that began on Thursday.
Outgoing party chief, President Hu Jintao - almost certain to be succeeded by Vice President Xi Jinping - said in a speech to the congress that China would stick to policies fostering sustainable, long-term economic development with the aim of doubling GDP over the 10 years to 2020.
China has cut benchmark interest rates twice this year, lowered bank reserve ratios three times since late 2011 and made repeated, large-scale liquidity injections into the financial system to underpin slowing growth in the short-term.
Tame inflation implies scope to further loosen monetary policy. Consumer prices in October are forecast to have risen 1.9 percent from a year ago - the same as in September and slightly higher than a 30-month low posted in July.
Analysts expect 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 a corporate sector struggling to cope with falling profits.
Property prices - which Beijing has vowed to bring down to a reasonable level - remain arguably the biggest risk to pro-growth policies, which could be scaled back if housing inflation begins to reassert itself in the face of easier credit conditions.
It's a particular irony given that a rebound in property investment, as part of overall fixed asset spending, is regarded by investors as the bellwether indicator of a firm recovery in domestic economic conditions, as real estate directly impacts about 40 other business sectors.
"Housing prices are a particular concern. If they rebound very sharply and force the government to make a choice to tighten credit to the property sector again, that would be a major downside risk," Nomura's Zhang said.
Additional reporting by Beijing Economics Team; Editing by Alex Richardson