TOKYO, Japan (AP) -- Japan's economy grew less than originally thought in the third quarter because of a downward revision in businesses' capital investment, the government said Friday, clouding the outlook for the world's No. 2 economy.
The rising price of raw materials has put a drag on the Japanese economy in the third quarter.
The economy expanded at a 1.5 percent annual pace in the July-September quarter, worse than the preliminary estimate of 2.6 percent, according to figures released by the Cabinet Office.
The disappointing numbers come amid worries that Japan's growth might take a hit from a possible slowdown in the U.S. economy, which is wrestling with a credit crisis, as well as higher raw material prices.
Companies also apparently had greater inventories in their warehouses than first estimated, suggesting that demand may not be as strong as thought. Housing investment also dropped during the quarter.
"Inventories were a big contributor to the downward revision to the GDP," Economy Minister Hiroko Ota said at a news conference. Capital spending also negatively affected the data, she said.
Capital spending, which accounts for 15 percent of gross domestic product, was revised down to a 1.1 percent quarter-on-quarter rise from a preliminary 1.7 percent increase. Inventories subtracted 0.1 percentage point from growth.
Private residential investment plunged 7.9 percent -- the largest drop since a 11.1 percent tumble in April-June 1997 -- damaged by tighter building regulations that came into force in late June. That was slightly worse than the preliminary estimate of a 7.8 percent quarter-on-quarter drop.
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Consumer spending, which makes up about 55 percent of the economy, was unchanged from a preliminary 0.3 percent rise.
Overall domestic demand, as a result, subtracted 0.1 percentage point from growth, versus a 0.2 point contribution in the preliminary report.
Healthy demand for Japan's exports, however, supported growth, contributing 0.5 point to gross domestic product, upgraded from a preliminary 0.4 point contribution.
