Experts Now See Recovery on Way : Economy: The government issues forecasts of a rebound along with figures showing that housing starts and building permits rose in December.

The economy ended 1991 with one of its worst performances in recent memory, but fresh statistics--and new economic forecasts--suggested Wednesday that this year may see a visible, if lackluster, recovery.

Commerce Department figures showed that housing starts rose a modest 2.6% in December, although they sank to a 46-year low for 1991 as a whole. More important, the number of new building permits--a barometer of future activity--surged by 5.9% during the month.

Meanwhile, a monthly survey by regional Federal Reserve banks, while conceding that the economy was “lackluster” as the year drew to a close, reported Wednesday that both banks and businesses now “generally anticipate that economic conditions will improve by midyear.”

And an updated forecast by the nonpartisan Congressional Budget Office predicted that a “moderate” recovery--although admittedly a “lukewarm” one--”should take hold in the second half of the year and continue into 1993.”

The new round of reports came as President Bush signaled that the economic growth package he will unveil in his State of the Union address Tuesday is likely to be modest, despite calls by critics for major new stimulus.

Addressing the issue at a White House news conference, Bush told reporters that he would “eschew pure political approaches”--such as massive new spending programs or extra-deep tax cuts--because they would only drive interest rates higher and impede economic growth.

He also played down suggestions that his refusal to propose a sizable tax cut might push conservatives into backing rival GOP candidate Patrick J. Buchanan. “There’s one or two out on a real fringe running around up there that might find it difficult to support me,” he said.

Bush’s remarks appeared to reject appeals by conservatives both in the Administration and in Congress that the President propose a bold new economic stimulus program in his speech Tuesday. The group met with Bush on Monday.

The go-slow approach was endorsed Wednesday by Robert D. Reischauer, director of the Congressional Budget Office, who cautioned that new economic stimulus measures--including Democratic-backed tax rebates for the middle class--probably would be counterproductive.

However, the agency forecast that the economy’s growth rate would reach only a modest 3%, with the unemployment rate averaging close to 7% most of the year.

The moderate optimism for the second half of 1992 appeared to square neatly with the new, more optimistic forecasts that economists have been issuing since the Federal Reserve Board began pushing interest rates down sharply late last fall.

David Wyss--economist for DRI/McGraw Hill, a forecasting firm based in Lexington, Mass.--said the December figures on housing showed that “the lower interest rates finally are having an impact” on housing, which usually is among the first industries to feel such a change.

Wyss said the increase in new building permits provides “some evidence that we have some help coming out of this” economic downturn. “Generally speaking, (the December figure is) a good number,” he said.

The December report showed that the number of new housing starts rose to a seasonally adjusted annual rate of 1.103 million over the month from a revised 1.075 million in November. Meanwhile, building permits surged to an annual rate of 1.05 million from 993 million in November.

The report by the regional Federal Reserve banks, known informally as the Fed’s monthly “beige book,” chronicled continuing weakness in the economy but apparently no further worsening in any major sector of it.

The document said December holiday sales were “at or modestly above” their levels of a year ago, while output in the manufacturing sector was either steady or, in some industries, declining. Commodity prices were either steady or down slightly.

But the document also cited reports by real estate agents throughout the country that the recent reduction in mortgage rates has bolstered home sales, leading to a modest pickup in construction of single-family homes--although commercial building remained stagnant.

The relative positions of the key regions of the country remained unchanged from the previous month. New England still seemed hardest hit, with economic activity weak or stagnant in most of the rest of the country.

The Fed said California’s economy continued to be weak, particularly in the manufacturing sector, but residential real estate markets appear to have hit bottom and are leveling off. It said expectations of most businesses “remain subdued.”

In testimony before the Senate Budget Committee, Reischauer predicted that, without further cuts, the federal budget deficit would soar to $352 billion in fiscal 1992 and remain around the $200-billion level most of this decade.

He warned that “another round of spending reductions and tax increases, rivaling the $500 billion achieved in (the White House-congressional budget agreement of) 1990, must come soon if the deficit is to be reduced to reasonable levels.”

Times staff writer Douglas Jehl contributed to this article.