* China's economy seen growing 6.1% y/y in Q3, from Q2's 6.2%
* Demand at home and abroad falters as trade war bites
* More policy stimulus expected to ward off sharper slowdown
* Q3 GDP, Sept activity data due Friday, Oct 18 at 0200 GMT
By Kevin Yao
BEIJING, Oct 18 (Reuters) - China is expected to post its weakest economic growth in at least 27-1/2 years on Friday, raising pressure on Beijing to roll out more stimulus to counter the effects of a costly trade war with the United States.
Downbeat data in recent months has highlighted weaker demand at home and abroad, fanning expectations that Beijing will need new measures to ward off a sharper slowdown that could drive job losses.
Still, most analysts believe the scope for aggressive stimulus is limited in an economy already saddled with piles of debt following previous easing cycles, which have sent housing prices sharply higher.
Analysts polled by Reuters expect gross domestic product (GDP) to grow 6.1% in the July-September quarter from a year earlier, the slowest pace since the first quarter of 1992, the earliest quarterly data on record.
That would mark a further loss of momentum from the previous quarter's 6.2% pace, with analysts expecting the 2019 full-year expansion to slow a near 30-year low of 6.2%.
"The economy still faces big downward pressure," said Lu Zhengwei, chief economist at Industrial Bank in Shanghai.
"We should respond to pressure on the economy but also ensure the macro leverage ratio does not rise. So policy measures will be carried out with a focused and orderly way," he said, referring to China's overall debt level.
The government is targeting growth of 6-6.5% this year.
The outlook is unlikely to change for the better any time soon even as tensions in the protracted trade war between Beijing and Washington have eased somewhat. U.S. President Donald Trump said last week the two sides had reached agreement on the first phase of a deal and suspended a tariff hike, but officials said much work still needed to be done.
A slide in China's exports accelerated in September while imports contracted for a fifth straight month.
The drags on demand, both domestic and global, have hit several key parts of the economy with weakness seen in freight shipments, factory power generation, employment and entertainment spending. In September, auto sales posted their 15th straight month of decline while factory gate prices fell at their fastest pace in three years.
The International Monetary Fund has warned the U.S.-China trade war will cut 2019 global growth to its slowest pace since the 2008-2009 financial crisis, but said output would rebound if their dueling tariffs were removed.
However, while a shock dip in GDP growth below 6% in the third quarter would hit sentiment, it might not necessarily add to the case for urgent stimulus given employment remains steady, policy insiders said.
SLOW TO RESPOND
Beijing has relied on a combination of fiscal stimulus and monetary easing to weather the current slowdown, including trillions of yuan in tax cuts and local government bonds to fund infrastructure projects and efforts to spur bank lending.
But the economy has been slow to respond with business confidence shaky and local governments facing increasing strains as tax cuts hit revenues, weighing on investment.
The government publishes third-quarter GDP data on Friday (0200 GMT) along with other indicators for September.
Industrial output is expected to rise 5.0% in September from a year earlier, accelerating from a 17-1/2 year low of 4.4% in August. Growth of retail sales could pick up to 7.8% from 7.5%.
Fixed-asset investment growth is expected to slow to 5.4% in the first nine months from 5.5% in the first eight months.
Analysts in a Reuters poll expect the People's Bank of China (PBOC) would ease policy further by cutting banks' reserve retirement ratios (RRR) and the one-year loan prime rate (LPR), a new benchmark lending rate. (Reporting by Kevin Yao; Editing by Sam Holmes)