Japan‘s core machinery orders fell more than expected in September and the outlook pointed to more weakness, suggesting the economy may underperform as businesses show reluctance to invest amid sluggish demand at home and abroad.

Core machinery orders, a highly volatile data series regarded as an indicator of capital spending six to nine months ahead, fell 3.3% in September from the previous month, Cabinet Office data showed on Thursday.

That was bigger than a 0.8% decline expected by a Reuters poll of economists, following a 2.2% drop in August. However, orders rose 7.3% in July-September.

The outlook was even more gloomier with companies surveyed by the Cabinet Office forecasting that core orders will fall 5.9% in October-December from the previous quarter. That suggested capital expenditure may have a net negative impact on near-term gross domestic product growth in the world’s third biggest economy.

“Those who look at this round’s machinery orders results negatively might lower their outlook (for GDP growth) in the second half of the year,” said Hidenobu Tokuda, senior economist at Mizuho Research Institute.

However, the machinery orders in the past quarters more or less even out and probably would not dampen GDP growth in the third quarter, Tokuda added. Japan‘s economy likely expanded for a third straight quarter in July-September, though growth is set to remain fragile.

The Cabinet Office will announce the GDP data on Nov. 14 at 8:50 a.m.(23:50 GMT, Nov. 13).

The Japanese economy has failed to make much headway this year as weak demand at home and abroad has hobbled its recovery, forcing the Bank of Japan to once again push back the timing for hitting its 2% inflation target.

Prime Minister Shinzo Abe’s government has been counting on capital expenditure to drive private sector-led growth, seen as crucial for putting the economy on a sustainable footing, but businesses have been slow to invest because of sluggish demand, yen’s gains and external headwinds. The government also cut its assessment, saying a slowdown in the pick up of machinery orders can be seen.

Still, some, like Takeshi Minami, chief economist at Norinchukin Research Institute, don’t see a significant disruption to the recent upward trend in orders. “The negative 5.9% outlook (for Oct-Dec) isn’t as big a decline as the number makes it seem,” said Minami, adding that a slowdown in machinery orders would be temporary.

For more on Japan, watch Fortune’s video:

Capital expenditure has recently shown some signs of picking up, though analysts have cautioned that stubbornly sluggish global demand could make business managers wary about approving heavy investments. Indeed, despite reaping record profits thanks to a weak yen under Abe’s aggressive stimulus policy, Japanese companies have been hesitant to boost investment in recent years.

BOJ policymakers disagreed on how much importance they should put on the central bank’s commitment to maintain the pace of its government bond purchases, a summary of debate at their Oct. 31-Nov. 1 meeting showed, underscoring the difficulty of making a smooth shift to a new policy framework.