* Coincident index falls for 7th straight month in October * Govt cuts view on index, saying it shows deterioration * Govt says "high possibility" for Japan's recession By Kaori Kaneko TOKYO, Dec 7 (Reuters) - Japan's government said on Friday that there was "a high possibility" that the economy has slipped back into a recession after an index of economic indicators fell for a seventh straight month in October. The world's third-largest economy shrank in the September quarter for the first time since last year, adding to signs that slowing global growth and tensions with China are nudging it into recession. The index of coincident economic indicators fell a preliminary 0.9 point in October from the previous month, the Cabinet Office said on Friday. The coincident index consists of 11 indicators such as industrial output, employment and retail sales data. The government said the index showed deterioration, lowering its view for a second consecutive month. The last time the government used the expression "deterioration" in its assessment of the coincident index was between June 2008 and April 2009. It later said the economy was in recession, which is popularly defined as two consecutive quarters of contraction. But analysts said the slowdown in the trade-reliant economy may have bottomed out. "Japan's economy is probably hitting bottom in November or December. So the nation's recession is expected to be shallow and short-lived, " said Junko Nishioka, chief economist at RBS securities. "Factory output-related figures show positive numbers, which are seen to spread to wider in the economy. The economy will likely return to growth next year." One positive sign was the index of leading economic indicators, which showed a rise of 0.9 percent from September. The index compiles data such as the number of job offers and consumer sentiment and a gauge of the economy a few months ahead. Japan will announce its revised third quarter GDP on Monday. The economy likely shrank at a slightly slower pace in July-September than the government initially estimated because a fall in capital spending by firms may have been less than measured in preliminary data, according to a Reuters poll. Latest data showed Japanese factory output unexpectedly rose in October for the first time in four months, lifted by robust demand for smartphones in Asia and raising hopes that the worst of the contraction in the economy may be over.