Economic Index Dips, Indicates Slower Growth

WASHINGTON — The government said today that its chief economic forecasting gauge dipped 0.1% in September, the third decline in the last five months and a signal, analysts said, that the economy is headed for much slower growth but probably no recession next year.

The 0.1% September decline in the Commerce Department’s index of leading indicators followed drops of 0.7% in both May and July. Often, three consecutive monthly declines have been the signal of an impending recession.

But the latest declines have been interspersed with large monthly gains, including a revised 0.5% increase in August and a sizable 1.5% advance in June, the biggest gain since late 1986.

Robust Growth Slowing

After smoothing out the big month-to-month swings, analysts said the leading index was indicating a slowing of the robust economic growth of the last year.

“There is absolutely no question that the economy is slowing down,” said Lawrence Chimerine, chief economist of the WEFA Group, an economic consulting firm. “The only question is whether this slowdown will lead into a recession.”

Chimerine said he believed a recession can be avoided over the next 12 to 18 months, although he said this forecast could prove too optimistic if consumer spending slows more than expected or if the dollar comes under further sharp pressure from foreigners worried about the ability of the next administration to deal with budget and trade deficits.

Foreign Influence

If foreigners suddenly decide they no longer want to buy U.S. debt, that would force U.S. interest rates higher and could push the country into a downturn, he said.

The recovery from the 1981-82 recession completes a peacetime record of six years this month and the Reagan Administration is hoping this performance will persuade voters to keep the White House in Republican hands.

While many economists once believed that the new President would face a recession in his first year in office, most are now predicting the downturn will not occur until 1990 at the earliest.

The overall economy, as measured by the gross national product, is expected to expand at a robust 3.8% annual rate for all of 1988, the fastest pace since the last presidential election in 1984.

However, David Wyss, an economist with Data Resources Inc., predicted that growth next year would dip to around 2.3%. He said that forecast was in line with the signals from the leading index.

“We are looking for an economy that is slowing but not stopping,” he said.