Economy Indicators for March Rise 0.9% : Growth: Economists fear slowdown because rise in inflation isn’t enough to encourage Fed to lower interest rates.

The government’s chief economic forecasting gauge rose 0.9% in March, its biggest increase in nearly two years, the government said today.

The gain in the index of leading economic indicators, designed to forecast economic activity six to nine months in the future, means the gauge nearly regained the 1% loss it suffered in February.

It was the steepest increase since a 1.6% gain in June, 1988. Before dropping in February, the index had risen three straight months.

But while the gauge was up in March, some analysts were concerned that rising inflation, if it does not force the Federal Reserve to increase interest rates, certainly will not encourage the central bank to lower them.

High rates would slow further the already sluggish construction, auto and manufacturing sectors of the economy.

“We’re looking for a slowdown in activity in the second and third quarters due primarily to high interest rates,” said Paul Getman, an economist with Regional Financial Associates in West Chester, Pa.

“We’ll have an extremely sluggish construction sector and lackluster activity elsewhere, including business investment, which has been pretty good,” he added.

Indeed, construction, which relies on low-cost loans, slowed even before the start of the second quarter. The Commerce Department reported Tuesday that construction spending dropped 1.4% in March, its steepest decline in more than a year.

Six of the 11 forward-looking statistics contributed to the increase in today’s leading indicators, led by a gain in new plant and equipment orders.

Other positives were an increase in the price of raw materials, an increase in orders for consumer goods, higher stock prices, slower business delivery times and a drop in weekly unemployment claims.

Negatives included a decrease in building permits, a decline in the backlog of manufacturers’ unfilled orders and a drop in the money supply.

Two of the components were unchanged: the average workweek and an index measuring consumer confidence.

Although many analysts see slow growth ahead, there is virtual unanimity that the economy has avoided a recession.

“The business cycle trough is pretty much behind us,” contended Kermit Baker, director of economics at Cahners Economics in Newton, Mass. “Any risk of recession pretty much ended with the first-quarter (GNP) report. You’re not going to hear too many recession forecasts cropping up over the next few months.”

The first-quarter gross national product--the nation’s total output of goods and services--rose 2.1%, compared to a 3% increase for all of 1989, according to a Commerce Department report last week.

That was much stronger growth than many economists had predicted as the year began. At that time, many forecast GNP growth would be little improved from the fourth quarter’s 1.1% rate, the slowest in three years. Some even said the economy could topple into a recession.

But despite the surprising strength, the report also contained bad news on the inflation front--a 6.5% annual rate, the steepest increase since 1981 and up sharply from the 4.5% in 1989.