TOKYO (Reuters) -- Japan's core machinery orders slipped for a fourth straight month in October, in a sign the economy risks hitting a wall in the fourth quarter as slowing demand abroad and at home hit corporate and consumer spending.
Capital expenditure has been a rare positive for the economy over the past two quarters, fuelling investment in new equipment and automation as companies deal with a tight labour market due to a shrinking and rapidly ageing population.
Policymakers are counting on solid business spending to support demand as a broader global slowdown and a sales tax hike in October expose widening rifts in the world's third-largest economy.
Core machinery orders fell 6.0% in October from the previous month, down for a fourth consecutive month and dashing expectations for a 0.9% increase in a Reuters poll, Cabinet Office data showed on Thursday.
The fall marked the longest period of month-on-month declines in core orders since a similar stretch from October 2008 to January 2009, a government official told reporters at a briefing.
The core machinery orders data is a highly volatile series but regarded as a key indicator of capital spending in the coming six to nine months.
Japan's economy expanded at a faster pace than initially reported in the third quarter largely thanks to improvements in capital spending and private consumption.
However, some analysts say the third quarter strength masked fragility that could lead to future weakness, as the sales tax hike slows one of the economy's main growth drivers.
Recent data, including retail sales and household spending, suggested consumers tightened their purse strings following the sales tax hike, highlighting worries about weak consumer demand.
The Bank of Japan could offer a bleaker assessment on factory output than in October at its rate review next week, sources with direct knowledge of the matter said.
By sector, manufacturers' orders dropped 1.5%, dragged down by production machinery and information and communications, while core orders from the service-sector fell 5.4%, led by agriculture, forestry and fisheries.
Compared with a year earlier, core orders, which exclude those of ships and electricity, dropped 6.1% in October, falling at a faster pace than a 1.8% contraction seen by economists in a Reuters poll.
Japan's cabinet approved a $122 billion fiscal package last week to support stalling growth amid the outlook risks and as policymakers look to sustain activity beyond the 2020 Tokyo Olympics.
The Cabinet Office cut its assessment of the sector, saying machinery orders were "seen stalling", compared with the previous month's assessment that said the pick-up in orders was seen stalling.