By Stanley White
TOKYO (Reuters) - Japan's export growth slowed in July on reduced shipments of cars and electronics to Asia in a sign that the global demand outlook may be losing its luster.
The 7.6 percent annual increase in exports in July was bigger than the median estimate for 5.5 percent annual growth expected by economists in a Reuters poll, but still slower than June's robust 9.5 percent year-on-year rise.
Slowing export growth in July suggests overseas demand in third quarter may not be strong enough to help Japan's gross domestic product recover from a annualized 1.6 percent contraction in April-June as exports slumped and consumers cut back spending, raising questions about the need for more official economic stimulus.
"Exports to Asia look a little sluggish," said Hidenobu Tokuda, senior economist at Mizuho Research Institute.
"There is still time for exports to recover, but as of now they look a little weak. I don't think we need stimulus measures now, but this could become more likely heading into next year."
Exports destined for China, Japan's largest trading partner, rose 4.2 percent in July from a year ago, compared with June's 5.9 percent annual increase, finance ministry data showed.
Shipments to Asia rose 6.1 percent year-on-year in July, versus a 10.1 percent annual increase in the previous month.
In one bright spot, Japan's exports to the United States rose an annual 18.8 percent in July, more than a 17.6 percent annual increase seen in June, thanks to larger shipments of cars and medicines.
Imports fell 3.2 percent in year-on-year in July versus the median estimate for a 7.9 percent annual decrease as the cost of crude and liquefied natural gas fell.
The trade balance was a deficit of 268 billion yen ($2.2 billion), versus the median estimate for a 56.7 billion yen deficit.
The economy is expected to resume growing in the current quarter if consumer spending bounces back, but weaker exports suggest that the overall pace of expansion may not be enough to generate the price growth needed to banish the risk of returning to deflation.
(This story has been refiled to delete extraneous character in 2nd paragraph)
(Edited by Eric Meijer)