TOKYO (AP) -- A key barometer of corporate capital spending fell for the first time in three months in June but was better than expected, suggesting that Japanese business have yet to feel the full pinch of a sputtering global economy.
Core private sector machinery orders, which exclude often volatile orders from electric power firms and those for ships, fell 2.6 percent to 1.085 trillion yen ($9.916 billion) in June from the previous month, the Cabinet Office said Thursday.
Led by declines in demand from steelmakers and electrical machinery producers, the figure marks a substantial weakening from a 10.4 percent jump in May and a 5.5 percent increase in April.
Compared with a year earlier and without seasonal adjustments, core orders increased 9.7 percent in June, the data from the Cabinet Office showed.
The orders are considered an important gauge of business investment in the future, providing a window into corporate sentiment amid economic uncertainties and shrinking profits.
Economists had forecast a fall of around 10 percent.
"This means the corporate capital expenditure is not collapsing as feared," said Merrill Lynch economist Masayuki Kichikawa in an analysis memo. "Capex is showing the resilience probably because the corporate sector in Japan (has) accumulated little excess capacity during the recent economic expansion."
Core machinery orders in the April-June period managed a rise of 0.6 percent from the previous quarter, beating a government forecast made in May for a 10.3 percent tumble.
In the quarter through September, the Cabinet Office expects a 3 percent slide in core machinery orders based on its most recent survey of 280 machinery manufacturers.
"We continue to think that capital expenditure trend is likely to remain weak for the rest of 2008," Kichikawa added.
Orders from manufacturers grew 3.9 percent from May, while those from non-manufacturers declined 3.3 percent. Total orders -- including those from electric power firms and those for ships -- fell 4.8 percent to 2.7 trillion yen ($24.7 billion).
The machinery orders data came a day after the release of a government index of economic indicators, which it described as "worsening," reinforcing a gloomy domestic outlook.
Investor sentiment waned Thursday, with Japanese shares backpedaling following a strong rally the previous session. The benchmark Nikkei 225 Stock Average was off 0.98 percent at 13,124.99.