(Bloomberg) -- Japan’s businesses cut spending for the first time in five quarters in a sign of concerns over the global growth outlook, an outcome that may prompt a downward revision to second-quarter economic growth data.

Capital expenditures on goods excluding software fell 1.6% in the three months through June from the previous quarter, the finance ministry reported Friday. The reading was weaker than the corresponding figure released earlier by the Cabinet Office, which indicated business spending was unchanged versus the previous quarter. 

Spending on equipment including software grew 4.5% from a year earlier, missing the 8.3% gain forecast by analysts. Friday’s data will be factored into the revised gross domestic product figures due Sept. 8.

The latest figures feed into a picture of Japan’s growth being overly reliant on overseas demand. Initial second-quarter GDP data showed that while Japan’s economy grew by a surprise 6% during the period, the gains were driven by external demand that more than offset sluggish corporate and consumer spending. This report will add to impressions the country’s recovery is lagging behind rebounds in other advanced nations.

“I think GDP will probably be revised down,” said economist Yuichi Kodama at Meiji Yasuda Research Institute. “I suspect some companies are delaying investment projects due to labor shortage and the rising costs of materials. In the medium to long term, I expect capital investment to be strong, but we now face slowdowns in China’s economy, which could have an impact down the road.”

The weak spending, despite double-digit profit growth, was likely due to the global economic slowdown, a development that has made firms feel more insecure about the business outlook. Recent indicators suggested that the impact has become increasingly evident, with Japan’s exports falling for the first time in two years and factory output declining more than expected in July. 

The slow recovery in China and a faltering chip market also cast a shadow over projections for global demand. The International Monetary Fund said in July that the global economic outlook remains weak by historical standards as it predicted growth would slow to 3% in 2023 from 3.5% last year. In the latest attempt to halt a slide in the country’s residential property market, China has moved this week to allow its largest cities to cut down payment requirements for homebuyers.

“Due to the slow economic recovery in China, demand for smartphones, PCs, and other items has not been growing,” said Kazuma Kishikawa, an economist at Daiwa Institute of Research, Ltd. “Under such a situation, it is difficult to stimulate companies’ appetite for investment.”

Sticky inflation is another drag on spending, as companies contend with higher costs as well as the prospect of price-conscious consumers tightening their belts. Japan’s price hikes have been stronger than the Bank of Japan’s target and forecast, likely causing some companies to hold off on investment.

To cushion the hit on businesses and households, Prime Minister Fumio Kishida announced on Wednesday that he will expand gasoline subsidies and extend them until year-end, aiming to reduce prices to about ¥175 per liter in October. Kishida also indicated he’ll continue government subsidies to offset higher costs for electricity and natural gas, and put together additional economic support measures this month.

Still, Japanese companies posted strong earnings last quarter, driven by carmakers and manufacturing machinery producers. The latest BOJ Tankan survey also suggested Japanese companies have a strong underlying appetite to invest in the longer term. The report indicated that large firms planned to boost spending this fiscal year by 13.4% versus the prior period.

--With assistance from Paul Jackson.

(Updates with more details from report, economist comments)

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