Will Recession Follow Slowdown?

LIKE a steady drumbeat, the evidence of an slowdown in the United States economy pounds through the business pages. Auto sales are sluggish. Factory orders decline in February. Purchasing agents report new order growth in March at its lowest level in four years. Durable-goods orders and shipments are weak for two months in a row. Consumption spending proves lackluster. The Commerce Department's leading indicators fall in February.

Will the slowdown become a recession this year?

That's the question economists are asking now. Most say no, but not all.

``There will be a sharp slowdown in growth for the rest of this year,'' predicts Lincoln Anderson, an economist with Bear, Stearns & Co. ``But we think we can brush by with a near-miss and avoid a recession.''

Mr. Anderson's view hinges on the relative lack of distortions in the economy. Inflation hasn't hit double-digit levels. Business hasn't inadvertently built huge inventories.

Patrick Corcoran, an economist with the Prudential Insurance Company of America, is somewhat more pessimistic. ``We will see some negative growth in the second half'' of the year, he forecasts. ``Negative growth,'' that is, a decline in output, could mean a recession if it lasts two quarters or so.

Mr. Corcoran is counting on policymakers at the Federal Reserve System to reverse their current tight-money policy quickly. ``Once it is evident that the economy is weak, they will be energetic to ease'' the money supply, he says.

Sam Nakagama, another Wall Street economist, warns that ``the prospects for economic expansion have deteriorated considerably in recent weeks.'' He blames the marked slowdown in monetary growth.

Over the six-month period ended March 20, a narrow measure of money, M-1, grew at an annual rate of only 1.3 percent. M-1, currency in circulation plus bank checking accounts, is the fuel for the economy.

``Such low rates of monetary growth over six-month spans have always been followed by either a recession or minirecession,'' Mr. Nakagama notes.

The Fed hasn't been paying much attention to M-1 for a few years. That's because M-1 didn't work as a predictor of total national output in the early 1980s as well as it had in the 1960s and '70s. But Nakagama suspects that the old relationship between M-1 and the gross national product is being restored. He cites some evidence of this during the past two years.

``Eight quarters do not a reliable indicator make,'' counters Corcoran, who is nonetheless a bit more gloomy than Nakagama.

Geoffrey Moore, director of the Center for International Business Cycle Research at Columbia University, sees evidence of a slowdown, but no ``clear signs'' of a recession.

Dr. Moore uses the traditional cyclical-indicators method for making forecasts, looking at statistical trends that have signaled slumps in the past. His reading of a set of long and short leading indicators points to a ``modest'' slowdown this year.

Actually, 3 out of 4 of some 300 economists surveyed by the National Association of Business Economists believe a recession will start between now and the end of 1990. Most figure the Fed will push interest rates high enough to send the economy into the dumps in 1990.

The Fed itself is certainly aware of the lags between tight money and its impact on the economy. Fed policymakers, meeting Feb. 8, decided to leave interest rates unchanged for the immediate future but to push them upward if the risk of inflation rose, according to minutes released Friday. Since then, the Fed has not panicked when the producer price index surged higher, but has kept interest rates steady.

Nearly all members of the Federal Open Market Committee ``believed that the risks remained on the side of greater inflation.'' Maybe the pileup in evidence of a slowdown will raise the risk of a recession in the minds of the 12 voting members of this committee.