The gross domestic product data for October-December released Monday sent mixed signals, with higher plant and equipment investment coupled with dismal consumer spending.

Several economists interviewed about the figures were generally cautious, if not pessimistic, about whether the economy can recover later in the year.

Susumu Takahashi, chief economist at the Japan Research Institute, said the fall in GDP does not signal another downturn of the economy despite two consecutive months of decline.

"What deserves particular attention in the latest data is that business capital spending has turned positive at last, after apparently hitting bottom," he said. "It is a sign of the start of a self-sustaining recovery in private demand."

But it is premature to judge how strongly capital spending will recover down the road, he said, pointing out that large businesses are still cautious about information technology investment and many sectors still have excess capacity to dispose of.

"For the time being, the economy will be flying with only one engine in a twin-engine plane," he said, referring to the strong capital spending and weak consumption.

Kazuo Mizuno, chief economist at Kokusai Securities Co., said the October-December figures symbolize the economic conditions that will likely continue in the next few years.

"Corporate activity has clearly improved while personal consumption remains sluggish because of slashed winter bonuses," he said. This contrast should also affect the upcoming spring wage offensive, putting negative pressure on summer bonuses for salaried workers, he added.

Expanding capital spending will probably continue through the current January-March quarter, led by IT-related sectors, he noted.

"Consumption-led recovery is now unthinkable," he said, adding it will take three to four years before personal consumption becomes strong enough to lead the economy.

He also argued that halting a rise in stimulus spending is necessary even though the effects of public works projects seem to be fading. Since an increase in public works spending would delay restructuring in non-IT sectors, public investment should be neutral or even reduced gradually, he said.

Hiroshi Sakurai, chief economist at Kankaku Securities Co., said capital spending will lead the economy through the July-September quarter but should run out of steam in October-December.

"It is going to be a short-lived recovery," he said.

He pointed out that many firms have been investing in plant and equipment mainly in cash rather than out of bank loans, saying this pattern cannot continue through the end of this year.

A real recovery will be unlikely at least until fiscal 2001, he said, adding that the necessary conditions are a government debt-reduction policy, more deregulation and improved private demand.

Akiyoshi Takumori, chief economist at Sakura Securities Co., was more optimistic. "Private demand seems to be finally picking up," he said, pointing to the 4.6 percent increase in capital spending, which was "even a bit too strong."

Although personal consumption was down 1.6 percent, the improvement in capital spending will eventually lead to a rise in workers' income, he said.

Besides, the pump-priming effects of the current government policies have not run out yet, he added.

He said the 1.4 percent decline in the GDP was worse than his forecast of minus 0.9, adding the biggest negative factor was the minus 0.5 point contribution from net exports.

Imports rose 4.4 percent from the previous quarter, outpacing the 0.4 percent increase in exports.

He attributed the surge in imports to people dealing with fears over possible Year 2000 computer problems, saying a rebound is therefore likely in January-March.