(Recasts story, adds detail)
* Aug output +0.7 pct m/m vs forecast +1.5 pct
* U.S.-Japan trade talks cloud outlook for output
* Jobless rate 2.4 pct in Aug, job availability at 24-yr high
* Tokyo core CPI +1.0 pct yr/yr in Sept, below BOJ's price goal
By Stanley White
TOKYO, Sept 28 (Reuters) - Japan's industrial output recovered only modestly in August from a recent string of natural disasters, and economists expect lacklustre growth after electronics output tumbled by the most in 2 1/2 years.
Further clouding the outlook is the chance that Japan will shift more vehicle production to the United States to meet U.S. President Donald Trump's demands to lower his country's trade deficit and create more jobs.
Industrial output in the third quarter is likely to contract slightly, economists say. This decline should be temporary, because Japan's domestic demand remains firm, but external risks to the outlook are growing.
"Output this quarter will not be as strong as the previous quarter because of dip in demand for electronic parts," said Kentaro Arita, senior economist at Mizuho Research Institute.
"There is also a chance that Japan will come under pressure to shift more production to the United States if U.S.-bound exports increase."
Trade ministry data out on Friday showed factory output rose 0.7 percent in August from the previous month, less than economists' median estimate of a 1.5 percent rise and following 0.2 percent decline in the previous month.
Manufacturers surveyed by the trade ministry expect output to rise 2.7 percent in September and 1.7 percent in October.
Output rose in August due to a 5.2 percent increase in auto production and a 5.6 percent increase in the production of gear used to make semiconductors and flat-panel displays.
However, output of electronic parts and devices fell 8.8 percent in August, the biggest decline in 2 1/2 years. Some economists worry that the makers of these goods will cut output further because of rising inventories.
In July-September, output may fall around 0.5 percent, Mizuho Research's Arita said, which would be a reversal from a 1.3 percent increase in the previous quarter.
This decline should be short-lived, because Japanese companies are buying a lot of equipment to deal with labour shortages, economists said.
Rising wages should also bolster domestic demand for goods, economists say.
Still, some economists are worried, because the United States is embroiled in a trade war with China, which could indirectly curb Japan's exports of electronics and auto parts.
"We haven't seen any impact yet from the U.S.-China dispute, but this could start to show up in October," said Daiju Aoki, regional chief investment officer for Japan at UBS Securities.