In the third quarter of 2023, the Japanese economy contracted by almost 3%, marking its first decline of the year as household consumption was weighed down by inflation and corporate investment slowed, according to new revised data released on Friday.

The fourth largest economy in the world saw its GDP shrink on an annualized basis by 2.9% from July to September, which was a downgrade from the previously estimated 2.1% contraction, and worse than market predictions for a 2% decline, according to cabinet office data.

Kota Suzuki, an economist at Daiwa Securities, said, “Weakness in personal consumption is likely to continue for the foreseeable future, as real disposable income is likely to extend its decline, which is seen as a factor in sluggish consumption.”

There was a 0.2% reduction in private consumption, which comprises over half of the economy, over the third quarter. That underperformed the initial estimate of no change. The downward revision was attributed to prolonged inflation discouraging shoppers.

In October, there was a 2.3% reduction in inflation-adjusted real wages, which marked the 19th consecutive month in which real wages declined.