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This Weekend, Brace for China’s Data Deluge

Feargus Cooney | Lonely Planet Images | Getty Images

China releases a raft of economic data this weekend that include May inflation, export and industrial output figures - all of which could shed light on just how sluggish growth in the world's second biggest economy is proving to be.

Economists said they would pay close attention to the export and inflation numbers in particular.

China's exports grew a stronger-than-expected 14.7 percent in April, although many analysts say that number may have been overstated by companies trying to sneak cash into China to avoid tighter capital restrictions.

(Read More: Experts Warn of 'Glaring Discrepancies' in China Data)

A Reuters poll forecasts exports growth in May slowed sharply to 7.3 percent year on year, compared with the strong April numbers.

"We've got two interesting factors when it comes to exports," said Lombard Street Research Economist Freya Beamish. "The first is the extent to which they've [China's authorities] been successful in cracking down on invoicing to get capital in and out of China as we've had questions about whether the trade data are reliable."

The second factor, she said, was to see whether external demand was holding up export growth. "If we now see export growth falling back that's going to be quite serious for the economy," she added.

China's economy slowed unexpectedly in the first quarter of the year, growing an annual 7.7 percent and concerns about the outlook have grown amid signs of weakness. Data on Monday showed that China's factory activity shrank for the first time in May on soft demand for Chinese goods inside and outside the country.

(Read More: Things Are Looking Bad Outside China, Too)

"China's May economic data are due for release this weekend at a time when the economy's direction is unclear," analysts at Moody's Analytics said in a research note. "The effect of stimulus measures is fading, and industrial output is growing less robustly than expected."

Chinese industrial output grew 9.3 percent in April from a year earlier and analysts expect figures over the weekend to show a similar level of growth in May. Retail sales are expected to rise 12.9 percent in May from a year before versus a 12.8 percent increase in April.

China ramped up spending on infrastructure late last year to bolster its economy and recent comments from Beijing policymakers suggest they are reluctant to step in with further stimulus at a time when the economy is rebalancing away from export and investment-driven growth to consumption.

(Read More: Chinese Consumers Are Still Not Spending Enough)

"After just a few quarters of growth, China is slowing again which shows you that without short-term boosts, the economy is on a much lower trend-growth rate now," said Lombard Research's Beamish. "By the end of the year, if growth slows more China could implement some more consumer based stimulus such as subsidies," she added.

Inflation Risk?

Economists added that inflation, which picked up more-than-expected last month was also an important number to watch given signs of price pressures.

ING Financial Markets Research expects consumer price index (CPI) rose 3 percent in May from a year earlier, compared with a 2.4 percent increase in April, with the number subject to "upside risk."

Dong Tao, chief regional economist for non-Japan Asia at Credit Suisse added: "The CPI is important, it is the most complicated of the data given the recent trend with food price increases."

Chinese markets are closed Monday-Wednesday for a public holiday, so immediate market reaction to the weekend numbers is likely to be seen only overseas.

By CNBC.Com's Dhara Ranasinghe, Follow her on Twitter: @DharaCNBC

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