BEIJING (BLOOMBERG) - China is likely to post its weakest economic growth in more than a year when it releases quarterly data on Monday (Jan 17), as it counts the cost of a deepening property market slump and disruptions from Covid-19 outbreaks.

Gross domestic product (GDP) probably expanded 3.6 per cent in the final three months of last year, the slowest pace since the second quarter of 2020, according to the median estimate in a Bloomberg survey of economists. December data for industrial production, retail sales and fixed asset investment, due the same day, are also expected to be weaker.

The loss of momentum is fuelling speculation of more monetary stimulus, with attention focused on a possible interest rate cut when the central bank announces a benchmark rate on Monday morning. Several economists have brought forward their forecasts for rate reductions as policymakers make it a priority this year to stabilise the economy.

The downturn in the latter part of last year is a sharp contrast to the first half, when the economy was rebounding from its pandemic slump and policymakers were paring back stimulus to curb financial risks.

That early performance will likely help China post 8 per cent growth for the full year in 2021, according to economists surveyed by Bloomberg, well above the government's target of "more than 6 per cent".

Here is a look at what is expected in Monday's bumper economic report:

Property crisis

The credit crunch in China's property sector shows little signs of ending, with economists projecting that property investment growth weakened to 5.2 per cent last year, the slowest pace since a national campaign in 2015 to reduce home inventories.

That slowdown, coupled with subdued infrastructure investment, could drive fixed asset investment growth lower to 4.8 per cent for the whole year.

Recent moves by the authorities to ease some of the restrictions on real estate funding have done little to ease pressure in the market. Home loan demand stayed weak in December, with household mid- and long-term loans, a proxy for mortgages, increasing by the lowest amount since February 2020, when the nation was in lockdown to control the initial Covid-19 outbreak.

Wary consumers

Consumer spending growth has yet to rebound to its pre-pandemic levels, as repeated outbreaks across the country dented households' sentiment. Economists see retail sales growth slowing further to 3.8 per cent in December from a year earlier.

Sporadic outbreaks towards the end of last year triggered a lockdown in the city of Xi'an. The spread of the highly transmissible Omicron variant in Tianjin and elsewhere in early 2022 is making the outlook even gloomier.

China's zero-Covid-19 strategy, while benefiting industrial production, is set to inflict more pain on consumption, especially on catering and travel. Economists anticipate Beijing to continue the policy and keep border controls in place throughout 2022 or even beyond, as the country enters a crucial political year and hosts the Winter Olympic games.

Lost jobs and income

While the official jobless rate likely remained unchanged at 5 per cent in December, there are doubts about whether it is reflecting the reality on the ground. Alternative indicators and anecdotal reports suggest unemployment is worse than the official monthly figures show. The data cannot fully capture migrant workers who left cities and those who dropped out of the labour force involuntarily, economists say.

Slow income growth is another factor hurting households, and boosting it will be key to supporting a meaningful rebound in consumption. Growth in disposable income per capita failed to keep pace with GDP expansion throughout last year, although the gap is narrowing.

Shrinking population?

China is also expected to release key demographic data on Monday, which will be keenly watched for signs the population could have shrunk in 2021, with deaths exceeding births for the first time. The birthrate already hit a record low in 2020, with the number of births falling to 12 million.

Interest rate

The People's Bank of China (PBOC) will decide whether to cut a key policy rate and roll over 500 billion yuan (S$106 billion) of maturing policy loans on Monday ahead of the GDP report.

All but four of the 10 economists polled by Bloomberg forecast that the rate on the one-year medium-term lending facility (MLF) will remain unchanged at 2.95 per cent, even though the chorus is growing for a reduction. Eight of them expect a full rollover of the maturing funds.

The PBOC is likely to wait for the release of January's credit data before making a call to cut the MLF rate, according to Citic Securities' Mr Ming Ming. A rate cut could inflate asset bubbles, and will not solve the economy's structural problems and weak demand, which needs to rely on fiscal stimulus, he said in an interview.