UPDATE 1-China inflation cools, leaving scope for policy easing
* Oct CPI +1.7 pct y/y vs f'cast +1.9 pct (Sept +1.9 pct
* PPI -2.8 pct vs f'cast -2.7 pct and -3.6 pct in Sept
* Industrial output, retail sales, FAI due at 0530 GMT
* Industrial output seen at 9.4 pct vs 9.2 pct in Sept
* Oct retail sales f'cast +14 pct y/y vs +14.2 pct in Sept
By Nick Edwards and Kevin Yao
BEIJING, Nov 9 (Reuters) - China's annual consumer inflation eased to its slowest pace in nearly three years in October, official data showed on Friday, giving policymakers scope to further loosen monetary policy if needed to support growth in the world's second-biggest economy.
The consumer price index rose 1.7 percent from a year ago, slower than the 1.9 percent posted in September. Economists polled by Reuters had expected inflation to hold steady.
Factory-gate prices in October fell 2.8 percent from a year earlier, a touch faster than the forecast fall of 2.7 percent but easing from September's 3.6 percent annual drop, which bodes well for a corporate sector struggling to cope with falling profits due to producer price deflation.
"The CPI I think came in a little bit lower than we expected and the market expected and further confirms that inflation is not a main concern for the government for now," said Zhang Zhiwei, Chief China Economist at Nomura in Hong Kong.
"So policy easing will likely continue for this quarter to support growth's recovery. We don't think they will cut interest rates for the rest of the year but we think they will probably keep the credit supply - the total social financing - at a high level for the coming months."
It was the lowest CPI reading since January 2010.
Data due at 0530 GMT is expected to point to a strengthening in October of China's recovery from its slowest period of growth since early 2009, and could cement investor expectations of a cyclical rebound.
Fixed asset investment and industrial production growth are the key numbers to watch, as they are barometers of both domestic activity and output from China's export-oriented factory sector. Retail sales data is also due.
If the read-outs offer more evidence supporting a rebound in the final three months of 2012, it could be a turning point for investors who have been bearish on China after seven successive quarters of slowing annual growth.
October likely saw a 9.4 percent year-on-year rise in industrial output, according to the consensus forecast from a Reuters poll.
That would be a small improvement on the 9.2 percent growth achieved in September which - along with a tick higher to 20.5 percent in year-to-date fixed asset investment growth - analysts see as flagging a potential turning point for China's economy.
The consensus view among economists is that a seven-quarter long cyclical downturn in China's growth ended in Q3, when it dipped to 7.4 percent year-on-year.
A tepid rebound to 7.7 percent is anticipated in Q4, with its mild nature restraining many investors from making aggressive turnaround bets, as evidenced by 10 of the 27 analysts polled by Reuters having forecasts below the median.
Beijing has been fine-tuning economic policy for a year to support growth, and analysts expect that programme to broadly remain in place after a new leadership of the ruling Communist Party is unveiled at a congress that began on Thursday.
Outgoing party chief, President Hu Jintao - almost certain to be succeeded by Vice President Xi Jinping - said in a speech to the congress that China would stick to policies fostering sustainable, long-term economic development with the aim of doubling GDP over the 10 years to 2020.
China has cut benchmark interest rates twice this year, lowered bank reserve ratios three times since late 2011 and made repeated, large-scale liquidity injections into the financial system to underpin slowing growth in the short-term.