TOKYO, Feb 21 Reuters Japan39;s government downgraded its view on the economy in February for the first time in three months on sluggish consumer spending, suggesting a bumpy path out of a recession in the face of slow wage recovery and lackluster industrial output.

The government also slashed its assessment on consumer spending for the first time in two years, saying a pickup seems to be stalling, underlining the challenge for the Bank of Japan as it looks to exit its ultraeasy policy this year.

The downbeat assessment comes after data last week showed Japan39;s economy unexpectedly slipped into recession in the fourth quarter on weak domestic demand, losing its position as the world39;s thirdlargest economy to Germany.

The economy is recovering moderately though it appears to be stalling recently, the Cabinet Office said in its report on Wednesday. It was the first downgrade since November 2023.

The lower assessment on consumer spending was due to a pause in recovery in service spending and a fall in spending on nondurable goods because of factors such as price hikes.

The nation39;s real wages fell for 21 straight months in December as inflation outpaced wage recovery and continued to weigh on household spending.

The suspension of some auto production and shipments prompted the government to cut its view on industrial output for the first time since March 2023. It said while industrial output was expected to pick up production activity fell recently.

The…