Japan\'s factory output unexpectedly fell 1.2 percent in July, the industry ministry said Friday, the latest evidence that turmoil overseas is damaging a recovery for the world\'s third-largest economy. The decline from a month earlier was worse than a market forecast of 1.8 percent growth. The government kept in place its assessment that factory production was stuck in a flat trend. Growing fears about the fiscal situation in Europe -- a major market for Japanese products -- and a strong yen is hurting demand for products from the nation\'s factories. A survey of manufacturers released with the data showed that companies expect output to inch up 0.1 percent in August from the previous month before tumbling 3.3 percent in September. Separately, other official data released Friday showed consumer prices were down 0.3 percent on-year in July, the third consecutive month of falling prices, the internal affairs ministry said. Japan has been in deflation for years, with a series of monetary and fiscal policy moves failing to reverse the trend. The ministry also reported that Japan\'s unemployment rate was flat at 4.3 percent in July, in line with market forecasts, according to Dow Jones Newswires.