China April data to show more modest loan, output growth, pick-up in inflation

BEIJING (Reuters) - Chinese economic data in coming weeks is expected to show activity moderated in April after a strong showing in March, adding to questions over whether the world's second-largest economy is recovering, a Reuters' poll of economists showed. Growth in bank loans and industrial output is expected to have cooled, while exports could decline, albeit marginally, after expanding for the first time in nine months in March. Fixed-asset investment may have expanded at a faster rate, however, while producer price deflation likely eased, easing strains on companies' balance sheets. April will give investors their first look at the state of the economy after the volatile first quarter when data can be distorted by the long Lunar New Year holidays. Stronger-than-expected March readings and a jump in prices of raw materials such as steel had fuelled hopes that the country's prolonged economic downturn was bottoming out and business conditions were improving. But official and private factory surveys earlier this week showed expansion slowed in April, raising doubts about whether the March pick-up will prove sustainable. Economic activity increased on the back of record bank lending in the first quarter, but worries of a speculative commodity bubble and fast-rising home prices, as well as spreading debt defaults and bad loans, have for now caused regulators to tap the brakes on expectations of further aggressive stimulus. Chinese banks likely extended 900 billion yuan (95.31 billion pounds) in new yuan loans in April, down sharply from 1.37 trillion yuan in March. M2 money supply likely rose 13.5 percent from a year earlier, quickening from 13.4 percent. "We think the momentum of policy easing has peaked in the near term. We expect China's policy stance to remain largely unchanged in the next couple of months, with Q2 data release and July's politburo meeting as the next potential opportunity to revisit current policies", UBS analysts wrote in a note Tuesday on the outlook for upcoming data. Industrial output is expected to have risen 6.5 percent, lower than March's 6.8 percent spike but higher than recent months, as increased government spending on construction projects has spurred a recovery in production of steel and other building materials. Exports likely reversed, however, dipping 0.1 percent and suggesting that March's strong 11.5 percent rise may have been a Lunar New Year anomaly. Exports fell 9.6 percent in the first quarter from a year earlier. Imports are estimated to have fallen 5 percent, an improvement from a 7.6 percent decline in March but pointing to still-lacklustre domestic demand. China's trade surplus may have risen to $40 billion. For those looking for signs of stabilisation, more encouraging takeaways may come from investment and price data. Growth in urban fixed-asset investment, which had been on a steady decline the last two years, likely accelerated to 10.9 percent in the first four months of the year, the highest since August, from 10.7 percent in the first quarter. Four years of producer price deflation, meanwhile, may show further signs of easing, likely due to the rebound in commodity prices. Factory-gate prices are expected to have declined 3.8 percent, slower than March's 4.3 percent fall. Consumer inflation may have hit the highest levels since May 2014. Economists expected a 2.4 percent rise in the consumer price index, though that would be only slightly better than 2.3 percent in March and below the government's 3 percent target. Much of the recent rise is due to high pork prices, which rose 28.4 percent in March. The Beijing municipal government said on Tuesday it would release 3 million kilograms of frozen pork reserves to combat high prices. Forex reserves likely fell to $3.2 trillion from $3.21 trillion after a surprise increase in March, but the narrow decline indicates analysts do not expect a return of the widespread capital flight seen just a few months ago. Pressure on the yuan has eased as the U.S. dollar has weakened, though the yuan still faces depreciation pressure as Beijing remains in a monetary easing stance while the U.S. Fed contemplates raising rates, which could revive the dollar. Retail sales growth was seen at 10.5 percent in April, flat from March. (Reporting by Elias Glenn; Additional reporting by Shaloo Shrivastava; Editing by Kim Coghill)