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The nation’s economy spurted forward in the July-September quarter, growing 0.7 percent from the previous quarter, the Cabinet Office said Wednesday.

But the gains came with data that show slowing overseas demand, confirming fears that the nation’s export-driven economy is already out of breath — less than a year after emerging from its last recession.

The nation’s real gross domestic product — the total value of goods and services within a country’s borders — grew for the third consecutive quarter, expanding at an annualized rate of 3 percent. The growth was due to firm consumer spending, which offset drops in business spending and external demand.

But external demand, which had been pulling the economy forward since January, fell in the July-September quarter. This reversal casts doubt over the sustainability of the recovery.

“The economy may contract again, probably by the end of the fiscal year,” said Yasunari Ueno, chief market economist at Mizuho Securities Co. “Growth in domestic demand is a fluke. No one really believes this is going to last.”

Wednesday’s data show wages down for the sixth consecutive quarter, indicating that the growth in spending was due to consumers using more of their savings. This is unlikely to continue, as the Cabinet Office’s Consumer Confidence Survey showed consumer optimism worsening for the third month in a row in October.

Meanwhile, business spending — the second largest part of the economy and a key ingredient in translating exporters’ gains to the rest of the economy — refused to grow, falling 0.9 percent on a revised 0.2 percent gain the previous quarter.

Companies plan to continue cutting spending, according to machinery order forecasts for the October-December quarter.

The economy showed a revised 1 percent quarterly rise in the April-June period and a 0.2 percent growth in the January-March quarter, when a surge in exports helped manufacturers push the economy out of recession.

Exports continue to rise, Wednesday’s data showed, but grew only 0.5 percent from the previous quarter, far short of the 5.9 percent rise it had in April-June.

With clouds hanging over the global economy, the nation will have to look beyond exports if it is to avoid entering another recession so soon after escaping its last.

“Increased uncertainties centering around the U.S. economy are deteriorating the (export) environment,” said Heizo Takenaka, minister of both economic policy and finance, after the figures were announced. “We will monitor carefully how the economy progresses.”

Because the results showed economic growth, the data by itself is unlikely to fuel calls for further government spending, analysts said.

Some politicians have urged as much as 10 trillion yen in additional spending to battle deflation, while Prime Minister Junichiro Koizumi has argued to keep extra spending at around 3 trillion yen.

The government will consider policies “cautiously and flexibly, cooperating with the ruling coalition parties,” Takenaka said.

Koizumi himself seemed reassured by the growth.

“These numbers are pretty good,” he told reporters. “At this rate, we will be able to beat government projections.”

The government has projected real growth of 0.2 percent for the fiscal 2002 year, which it will make if the economy shrinks an average of 1.4 percent from the previous quarter for the next two quarters.

Wednesday’s data also show price falls continue to act as a drag on the economy.

The GDP deflator, a measure of pressure from price changes, was set at minus 1.6 percent in the July-September period, down for the 18th consecutive quarter since the data was made available.

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