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(Bloomberg) — China’s economy likely continued to show signs of improvement in April, buoying the outlook for recovery as policymakers ramped up support. 

Data due Friday will offer a glimpse of whether the world’s second-biggest economy was able to sustain the recovery momentum in the first quarter as it seeks to achieve an ambitious full-year growth of around 5%. 

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Industrial production probably remained a key growth driver, with robust exports and infrastructure investment driving demand. Consumption could still be a drag as an ongoing property slump has weighed on sentiment. 

There’s been a drumbeat of pro-growth signals from China in recent weeks. Top leaders hinted at measures to reduce property inventory — with Beijing mulling a plan for local governments to buy millions of unsold homes. China will kick off the sale of its 1 trillion yuan ($138 billion) ultra-long special sovereign bonds on Friday, a move to raise funds to support the economy. This also spurred expectations of further monetary easing to help banks buy up the notes. 

“It is a gradual recovery,” said Michelle Lam, an economist at Societe Generale SA. The bank upgraded its forecast for China’s growth this year to 5% after positive data in the first quarter. Investors are waiting to see what new policies will be announced for the property sector, but “it could mean stabilization earlier than thought,” she said.

Here’s what to expect when the National Bureau of Statistics publishes the data on 10 a.m. Friday: 

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Industrial Production

Industrial output is set to rise 5.5% in April from a year earlier, according to a median forecast by economists in a Bloomberg survey. That’s an acceleration from the 4.5% increase in March.

Both the official and private surveys of manufacturers pointed to an expansion in factory activity last month. Data from the statistics bureau showed a sub-gauge of output climbing to the strongest level in more than a year. A measure of new export orders posted its first back-to-back expansion since March 2023.

But China’s strong industrial output is a source of tensions with the West. The US and Europe have criticized Beijing for flooding the global market with cheap goods, particularly in new energy sectors. Amid those concerns and as producer prices remained stuck in deflation, China urged lithium battery makers not to build plants that are “simply aimed at expanding production capacity.”

Consumption

Retail sales probably climbed 3.7% last month, picking up from a 3.1% gain in March. Still, that’s a weaker pace than what China was used to before the pandemic. Domestic demand remains weak, as seen in inflation data that’s only marginally above zero, as well as a surprise contraction in credit numbers.

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Vehicle sales, which make up about 10% of overall retail sales, also reflect sluggish demand. The China Passenger Car Association said sales via retail networks fell 5.8% in April from a year ago, as consumers waited for more discounts amid a price war among automakers. 

To spur demand, the government rolled out a program to encourage households and businesses to upgrade their old machinery and home goods. Cars are at the center of this plan, with the central government providing as much as 10,000 yuan ($1,385) in one-time subsidies for individuals replacing their vehicles.

Total fiscal funding for the car trade-ins could reach 80 billion yuan, exceeding an earlier anticipated cap of no more than 50 billion yuan, and could force the government to cut spending elsewhere, Morgan Stanley economists including Robin Xing said this week. 

The program, along with other recent policies, “offer some visibility on relatively stable economic growth for the rest of this year,” the economists said. However the measures have not been forceful enough to reflate the economy, they added. 

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Investment

Fixed-asset investment likely expanded 4.6% in the January-April period, slightly up from a 4.5% gain in the first quarter. 

But property investment could have tumbled 9.7% in the first four months, worse than the drop of 9.5% in January-March. The country’s biggest developers have been under pressure after a persistent slump in home sales, leaving the companies with little confidence or means to expand. 

More cities are scrapping curbs on residential property purchases to stimulate demand, with Hangzhou — the home base of e-commerce giant Alibaba Group Holding Ltd. — among the latest. The government in April also banned new land sales to build homes in cities with severe inventory overhang. 

Infrastructure investment was likely resilient as funds raised from last year’s additional 1 trillion yuan of sovereign bond issuance is still being spent on water conservation, transport, disaster relief and other projects. 

More Stimulus

China’s recovery is set to continue, helped by a spate of pro-growth policies announced in recent weeks. The issuance of this year’s 1 trillion yuan in special sovereign notes will go on until mid-November, while local governments can still tap more than 70% of the annual 4.62 trillion yuan new bond quotas. 

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This could prompt the government to ease monetary policy to ensure ample liquidity for the bond sales and prevent disruptions to the financial system.

The central bank “may provide some liquidity support during the bond issuance, and even indirectly purchase some of them through its balance sheet expansion,” Goldman Sachs Group Inc. economists including Lisheng Wang wrote in a note on Monday. 

They predict the PBOC will cut the reserve requirement ratio twice by 25 basis points each in the current and final quarters, as well as lower the policy rate by 10 basis points in the July-September period.

(Updates with analyst comment in fifth paragraph)

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