TOKYO (Reuters) - Japan's government lowered its assessment of consumer spending in February, the first downgrade in 11 months, as some shoppers have become increasingly frugal in the face of rising food prices.
The government left unchanged its overall assessment that the economy is recovering gradually though pockets of weakness remain.
The dim view of consumer spending could become a source of concern for policymakers, as it suggests the economy may continue to struggle to generate inflation.
"The recovery in consumer spending has stalled recently," the Cabinet Office said in its monthly economic report released on Thursday.
This marked a downgrade from last month, when the Cabinet Office said consumer spending was recovering.
Wages and labor conditions are improving, but retail sales and household spending have been dented recently as rising food prices - bad weather has pushed up vegetable prices - cause some consumers to cut back other spending, the report said.
The Cabinet Office, which helps coordinate economic policy, also downgraded its assessment of the housing market to say it is weakening.
Recent data have shown a large decline in the construction of rental properties due to oversupply, which prompted the downgrade, the report said.
On the positive side, the government upgraded its assessment of capital expenditure for the first time in 11 months to say it is showing signs of recovery.
The Cabinet Office also raised its assessment of exports for the first time in four months, saying that they are recovering.
Exports drove gross domestic product growth in the fourth quarter, but tepid private consumption and the risks of U.S. protectionism have cast doubt on the outlook for Japan's economy.