TOKYO (AP) -- A key barometer of corporate capital spending in Japan fell for the second straight month in July, indicating that business investment is retreating amid higher costs and a global slowdown.
The Cabinet Office said Thursday core private sector machinery orders, which exclude often volatile orders from electric power firms and shipbuilders, fell 3.9 percent to 1.04 trillion yen ($9.67 billion) in July from the previous month.
The result was better than a 4.9 decline forecast by Kyodo news agency but did little to abate concerns that the world's second-largest economy is buckling under the weight of sluggish exports and high material prices.
Initial government estimates showed that second-quarter gross domestic product contracted at a 2.4 percent annual pace. But revised GDP figures are due out Friday, and economists predict a much steeper economic contraction than originally reported.
The government maintained its assessment that machinery orders were "weakening." The data represent an important gauge of capital spending -- a main driver of Japan's economic growth -- in the next three to six months.
Led by declines in demand from chemical product makers and general machinery companies, the figure follows a 2.6 percent slide in June and a 10.4 percent jump in May.
Compared with a year earlier and without seasonal adjustments, core orders fell 4.7 percent in July, the data showed.
Orders from manufacturers slid 10.4 percent in July for the first time in four months, while those from non-manufacturers declined 2.4 percent. Total orders, including those from electric power firms and ships, were down 8.5 percent.
Overseas orders tumbled 14.4 percent, a significantly sharper downturn than expected.
If foreign orders keep sliding, "it would imply that the external demand is falling more than many firms expected, raising a risk of an abrupt shift of corporate behavior to serious retrenchment," said Masamichi Adachi, senior economist at JP Morgan Securities in Tokyo, in a research memo.
For the July-September quarter, the Cabinet Office expects a 3 percent slide in core machinery orders based on its survey of 280 machinery manufacturers.
The benchmark Nikkei 225 index was down 1.66 percent at 12,141.68 in early afternoon trading.