Tokyo, March 19 (Bloomberg) -- Japanese companies and consumersprobably spent less on services in January, the first drop in four months,as the domestic economy slowed and demand for exports fell, economistssaid. The so-called tertiary industry activity index, which measures output atrestaurants, phone companies and other service providers, probably fell0.7 percent in January from December, seasonally adjusted, according tothe median of 19 forecasts in a Bloomberg News survey. The index rose1.2 percent in December. ``With production going down, services provided to companies are leadingthe decline,'' said Eishi Yokoyama, an economists at Chiyoda Life CapitalManagement Ltd. ``The overall trend in tertiary is going to be downwardfrom here on.'' Services output is watched by economists as it's closely linked todomestic demand, which accounts for about 60 percent of total economicoutput. In the three months ended Dec. 31, the index rose 0.3 percent, itsweakest pace in a year, signaling the Japanese economy is slowing. Meanwhile, the all-industry activity index, which adds construction,industrial production and government output to the tertiary index, probablyfell 1.5 percent in January from December, the first drop in three months,the survey showed. Much of the decline came as industrial production, which accounts forabout one-fifth of overall output and drives demand for services, dropped4.2 percent in January from December, seasonally adjusted. That's thebiggest decline in more than six years and was caused by reduceddemand for Japanese exports from slowing U.S. and Asian markets. Economists use the all-industry index as a proxy for gross domesticproduct. The index tallies production of goods and services, while GDPtracks spending on goods and services. The Ministry of Economy, Trade and Industry will release the report at 8:50a.m., Japan time, Wednesday.