Beijing, China (FT.com) -- China's economic recovery accelerated in October with industrial output increasing at the fastest rate since March of last year, while retail sales also grew strongly.

However, the Chinese central bank said that the rate of new lending declined last month, a possible indication that the government is beginning to slow the aggressive monetary stimulus it has injected into the economy this year.

Exports and imports were also weaker than expected last month.

China has rebounded faster and more strongly than any other major economy from the global financial crisis and economists believe the government will meet its target of 8 per cent growth in gross domestic product this year.

There have been increasing warnings that China could face bubbles in asset prices and even high inflation, however, as a result of this year's huge stimulus measures.

The State Council said in late October that monetary policy would remain "appropriately loose" for the time being, but added that it was also now monitoring inflationary pressures.

The central bank said that Rmb 253 billion ($37 billion) of new local currency loans were issued in October, down from Rmb 516.7 billion last month and well below the rapid rate of the first few months of the year.

But economists cautioned against reading too much into the drop in bank loans, as lending is usually weak in the fourth quarter. "Policy has already been modestly tightened with credit growth slowing sharply in the second half," said Ben Simpfendorfer, economist at RBS in Hong Kong. The October figures could "imply some tightening", he added.

The National Bureau of Statistics said that industrial production rose 16.1 per cent from the same month a year before, up from a rate of 13.9 per cent in the year to September. Power generation was 17.1 per cent higher over the same month last year, the fifth month in a row of increases.

Retail sales gained 16.2 per cent over a year earlier, accelerating from a 15.5 per cent increase the month before, while fixed asset investment increased 33.1 per cent year-on-year.

Although some analysts had been expecting a significant improvement in overseas orders, exports dropped 13.8 per cent year on year, a modest reduction in the rate of decline from September's 15.2 per cent. Imports fell 6.4 per cent year on year, against 3.5 per cent last month, leading the trade surplus for the month to increase to $24 billion.

Consumer prices fell 0.5 per cent year on year and were down 0.1 per cent compared to September. Prices at the factory gate fell 5.8 per cent compared to the same month last year.

The Shanghai Composite Index fell 0.5 per cent to 3,163.93 by early afternoon, its first drop in nine days.

© The Financial Times Limited 2009