(Bloomberg) -- China’s economy likely lost some momentum in November, raising expectations for Beijing to ramp up stimulus in the new year. 

Data due Friday is expected to show industrial output weakening from October and a contraction in property investment worsening as efforts to support growth have yet to take hold. Deflationary pressures remain a concern, casting a shadow over any uptick in year-on-year retail sales growth. 

“It is still too early to call the bottom,” Nomura Holdings Inc. economists including Lu Ting wrote in a Monday note. 

Figures for last month will be distorted by their comparison to 2022, when economic activity was stifled by the pandemic. That may lead economists to focus on compounded annual growth rates, or month-on-month comparisons. 

Weakness in the numbers is likely to add to calls for more stimulus, especially if President Xi Jinping targets an ambitious growth goal of about 5% for 2024. Recent meetings of top leaders suggested aid is likely to come in the form of fiscal stimulus, with monetary easing playing a supportive role.

The National Bureau of Statistics is expected to release November economic data Friday at 10 a.m. local time. Here’s what to watch:

Industrial Production

Industrial production is estimated to have risen 5.7% in November from a year prior, according to the median forecast among economists surveyed by Bloomberg. 

While that would be stronger than October’s 4.6% year-on-year increase, growth may be weaker when compared to 2019 levels, before the pandemic. The compounded annual growth rate compared to that time is estimated to reach 4.6% in November, easing slightly from 5% in October, the Nomura economists wrote in a November research note. 

The official purchasing managers’ index for the manufacturing sector pointed to more anemic factory activity in November, after the survey contracted for a second straight month. A sub-gauge measuring production dipped to the lowest in four months as new orders continued to shrink. 

High-frequency data has also suggested sluggish activity. The operating rates of cement mills and asphalt facilities — critical sectors for construction — were at 43% and 37%, respectively, in November. Both were below the levels recorded a year earlier, according to a recent report from UBS Group AG economists including Wang Tao. 

Steel output seems to have held up. Mills kept churning out the key building material as they anticipate government measures to help the property sector will support demand into 2024. 

Consumption

Retail sales likely jumped 12.5% last month from a year earlier, according to the Bloomberg survey. That would mark a significant acceleration from October’s gain of 7.6%, though both months compare to poor figures in 2022. 

More detailed data on consumer buying has been mixed. Passenger vehicle sales jumped 26% last month from a lockdown-induced purchase lull a year earlier. That suggests fierce pricing competition between carmakers and local government policies to encourage buying are having an impact. 

Spending on other goods may be less robust. Total online sales recorded by nationwide e-commerce platforms during November’s annual Singles’ Day shopping festival rose just 2.1% from a year ago, Citigroup Inc. economists led by Xiangrong Yu wrote last month. They cited calculations by a local data analysis firm.

Subdued household demand contributed to a deeper-than-expected drop in China’s consumer price index: The 0.5% decline in November was the steepest since 2020. A fall in producer costs also got worse. 

Fixed-Asset Investment

Fixed-asset investment is projected to have climbed 3% through the first 11 months of the year compared to the same time period in 2022. That would be a tad faster than the 2.9% increase in January-October.

Growth in manufacturing investment may have been resilient on continued policy support and improving industrial profits, according to UBS.

In late October, the government unveiled a plan to sell an additional 1 trillion yuan ($139 billion) worth of sovereign bonds to invest in infrastructure, a proposal intended to shore up economic activity. More than two thirds of those notes had been sold by late last month, according to estimates at the time from Founder Securities Co. analysts including Zhang Wei. Those funds are expected to fill an investment gap left by a tapering off of the issuance of special local government bonds, since provinces have been using up this year’s quota. 

The property slump is still likely to weigh on the investment figures, offsetting most of the strength in manufacturing and infrastructure. Investment in real estate development is forecast to have tumbled 9.5% in the period ended November as a contraction in new home sales deepened.

Policy Direction

The People’s Bank of China is widely expected to hold the rate on its one-year policy loans — called the medium-term lending facility — at 2.5% on Friday before the data release.

The central bank cut policy rates twice this year to support the economy. Its room for making additional trims has been constrained by weakness in the yuan and narrowing profit margins for banks. 

A combination of deflationary pressures and the PBOC’s cautious way of easing means real interest rates have climbed higher, discouraging businesses and households from borrowing. 

Top leaders vowed at an annual economic confab this week to keep credit growth in step with both the GDP and inflation targets. That’s reinforced expectations for measured interest rate cuts and reductions in the reserve requirement ratio — the amount of cash banks must keep in reserve — in the coming year.

Still, aggressive loosening is unlikely. A meeting of the party’s top 24 leaders last week dropped the word “forceful” from its description of monetary policy. 

Economists broadly see fiscal support taking a bigger role next year, given promises by Beijing to “appropriately strengthen” such policies. Many analysts have taken that as a sign the official budget deficit could exceed 3% of GDP again in 2024, after this year’s ratio was raised to 3.8% in October. 

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