A RAFT of China data over the coming week will give the first indications of the economy’s third-quarter performance, after conflicting signals suggested that more stimulus measures may be needed to ensure a sustained recovery.

    While manufacturing appears to have picked up, thanks largely to government support measures and a modest resurgence in exports, data this week showed sudden and unexpected weakness in the services sector.

    The decline appears linked to the cooling property market, which may be facing a prolonged slump that could hurt related businesses and dampen consumer confidence.

    A Reuters poll of 30 economists shows factory output likely held steady in July while overall investment growth ticked higher, chiming with expectations that a flurry of pro-growth steps from the Central Government earlier this year is paying dividends.

    Anecdotal evidence, however, suggests property investment, sales and construction could show a seventh month of deterioration, suggesting the sector will be an increasing drag on activity even if other parts of the world’s second largest economy are gaining traction.

    “We expect the upcoming July data to show steady momentum in real economic activity, on the back of the ongoing export recovery, policy support, robust credit expansion and improving business confidence,” Wang Tao, an economist at UBS, said in a recent note to clients.

    Some economists are concerned that policy measures may only generate a quick and temporary boost to factory activity before their effects begin fading out later in the year, much like the trend seen in past years when the government rolled out similar support measures.

    But other economists played down such worries, saying that a single month of data is far from enough to judge the health of the entire services sector or whether consumers are starting to tighten their purse strings.

    Indeed, economists in the latest poll expect a retail sales growth of 12.4 percent in July from a year earlier, the same pace as in June.

    The poll showed that fixed-asset investment, a key driver of the economy and also an important indicator to gauge the effect of government measures, is forecast to have grown 17.4 percent in the first seven months of 2014 from a year earlier, a touch higher than the 17.3 percent rise in the first half.

    Factory output likely grew by an annual 9 percent in July, compared with 9.2 percent in June, mainly due to a higher comparison base of a year ago, analysts said.

    The property slowdown may last for at least a year, weighing on the economy well into 2015, though a collapse is seen as unlikely if local governments continue to relax controls and banks keep credit ample, according to a Reuters poll last week.

    That would reinforce expectations that China will stick to more modest support measures in coming months, unless conditions in the property sector significantly worsen.(SD-Agencies)