Sept. 11 -- Japanese machinery orders fell for a second month in July, signaling manufacturers expect the global slowdown to crimp demand into next year. Orders, an indicator of capital spending in the next three to six months, declined 3.9 percent from June, when they slid 2.6 percent, the Cabinet Office said today in Tokyo. The median estimate of 35 economists surveyed by Bloomberg News was for a 3.6 percent drop. Japan's economy probably shrank last quarter more than initially estimated as business spending fell, the government is expected to report tomorrow. Slowdowns in the U.S. and Europe have taken a toll on Japanese exports, the engine that drove growth over the past six years, while stagnating wages and the worst inflation in a decade have subdued consumer spending. ``In this environment business investment has got to weaken,'' said Tomoko Fujii, head of Japan economics and strategy at Bank of America Corp. in Tokyo. ``Companies are very cautious in a recessionary environment and I don't think they're bold enough to anticipate a quick profit recovery.'' The yen traded at 107.41 per dollar at 9:08 a.m. in Tokyo from 107.43 before the report was published. Orders received from manufacturers tumbled 10.4 percent, the first decline in four months, the Cabinet Office said. Non- manufacturing orders fell 2.4 percent, the second straight drop. Capital Spending Companies reduced spending on factories and equipment for a fifth quarter in the three months ended June 30, the Finance Ministry said last week. Record costs for oil and raw materials caused profits to decline for the fourth consecutive quarter. The government will use the capital spending figures to revise second-quarter gross domestic product tomorrow. The economy contracted an annualized 3.1 percent, more than the 2.4 percent reported last month, according to economists surveyed. Slower growth in the U.S. has forced exporters including Toyota Motor Corp. to cut production and jobs. A Kyushu-based Toyota subsidiary reduced output of sport-utility vehicles by at least 10 percent and fired 800 workers since June. Tokyo Electron Ltd., Japan's biggest maker of semiconductor equipment, last month lowered its full-year profit forecast by 40 percent after chipmakers postponed spending plans. Chipmaker Elpida Memory Inc. said this week that it will have to cut output for the first time to mop up inventories that accumulated as global demand for personal computers slowed. More Resilient Even so, economists say the current slowdown is unlikely to be as severe as the last recession, which lasted from December 2000 to January 2002. The economy is more resilient because companies have shed the excess workers, factory lines and debt that contributed to a decade of stagnation in the 1990s. ``In the old days external shocks tended to get amplified,'' said Seiji Shiraishi, chief Japan economist at HSBC Securities Ltd. in Tokyo. ``But this time around, without the three excesses, the downside risks are limited.'' The world's second-largest economy may also benefit more than others from declining oil prices, according to Julian Jessop, who says Japan is unique in having escaped the credit crunch and the housing collapse that's hit the U.S. and Europe. Crude has eased 29 percent since reaching a record in July. ``That's going to relieve a lot of cost pressures,'' said Jessop, chief international economist at Capital Economics Ltd. in London. ``I'm convinced the Japanese economy will be one of the first to recover as the global inflation shock fades.'' Other economists say oil's decline reflects weakening demand and slower growth in the emerging markets that have helped Japanese companies weather the U.S. slowdown. In China, which in July passed the U.S. as Japan's biggest export customer, economic expansion has cooled for four quarters. ``You can't rescue the world economy just with lower oil prices,'' said Martin Schulz, senior economist at a research arm of Fujitsu Ltd., Japan's biggest computer services company. ``Asia has to correct quite a bit and that's an important market for Japan.''