The nation's economic growth is expected to sink to an 18-year-low in the first quarter, but analysts say the latest signs show a recovery might be in sight.

Economists forecast the country's economic growth may have dropped to an annualized rate of about 6 percent in the first quarter, but it is mainly due to the "high base" last year. The government is expected to release the data on Thursday.

"Despite the year-on-year slowdown, the Chinese economy has posted a strong recovery on a quarterly basis, making us more upbeat about the country's economic prospects," said Frank Gong, senior economist, JP Morgan, who predicted China's quarter-on-quarter GDP growth has rebounded to about 5 percent in the first quarter from only 1.5 percent three months earlier.

The improved macroeconomic data indicates that China's economy may have begun to recover and could stage a rebound in the second half of this year with the help of the massive stimulus policies, analysts said.

Premier Wen Jiabao said over the weekend the Chinese economy has shown "better than expected positive changes in the first quarter" thanks to the massive stimulus package.

There are already signs that business activity is picking up, thanks to loose credit and the decrease of industrial inventory.

China's official Purchasing Managers' Index or PMI, a measure of activity in the manufacturing sector, rose to 52.4 in March from 49.0 in February, marking the first time the index has been in expansionary territory since September. A reading above 50 indicates expansion.

The galloping credit growth has maintained its momentum through March. Chinese banks extended 4.58 trillion yuan in new loans in the first quarter, nearly equal to the 4.9 trillion yuan new loans issued in 2008.

Meanwhile, the country's consumption also held up well. Driven by the government policies to stimulate car consumption, China's automobile sales rose 5 percent in March to a record high of 1.11 million vehicles, according to the China Association of Automobile Manufacturers. The inventory in the real estate sector is shrinking faster than expected and as Gong estimates the inventory properties nationwide is likely to be sold out in the coming eight months, compared with his earlier estimates of two years.