Sluggish ’93 Predicted by Leading Indicators : Economy: The index fell 0.3% in September, the third decline in four months. Most analysts believe a new recession is unlikely.

The government’s barometer of future economic activity fell in September for the third time in four months, signaling continued weakness during the first year of the new presidential term.

Most analysts believe that the economy will escape a new recession. But they agreed that the 0.3% decline in the Commerce Department’s index of leading economic indicators on Tuesday suggested that it will remain a major problem.

“It’s not a harbinger that (the economy) is falling into another recession,” said Lynn Reaser, an economist with First Interstate Bancorp in Los Angeles. “But it is . . . certainly consistent with the belief the economy is not performing up to par and why it was a major factor in the election.”

Economist Sung Won Sohn of Norwest Corp. in Minneapolis said that while he also doesn’t expect a new recession, “certainly the probability of that has increased, because the leading indicators declined for two consecutive months.”

The index is designed to forecast economic activity six to nine months ahead. In the past, three consecutive declines were considered a fairly good, but not infallible, sign of an approaching economic downturn.

However, the index failed to predict the last recession, since it did not start turning down until August, 1990, a month after the recession began.

“Despite its name, it’s more indicative of what was happening in the third quarter than six months down the road,” Reaser said.

The government has estimated that the economy grew at a 2.7% annual rate in the July-September quarter, but many analysts said the number overstated the economy’s strength.

“My guess is that we’ll be well under 2% in the fourth quarter,” predicted Lawrence H. Meyer, head of a St. Louis economic forecasting firm. He said a 2.5% growth rate is the best that the nation can expect during the first six months of next year.

That would be less than half the growth of most recoveries following other recessions since World War II. Such slow growth would not be able to generate new jobs.

The index has fallen 0.3% in three of the last four months--June, August and September. The August decline originally was estimated at 0.2%. The index rose a mere 0.1% in July.

Six of the 11 forward-looking indicators were negative, led by a drop in the price of various raw materials, which suggested a lack of demand.

Other negatives were a shorter average workweek, fewer unfilled manufacturers’ orders, an increase in new claims for unemployment insurance, a drop in an index measuring consumer expectations and fewer orders for business plants and equipment.

The five indicators making positive contributions were: an increase in building permits; slower business delivery times, which is a sign of growing demand; an increase in orders for consumer goods; rising money supply, and higher stock prices.

The various changes left the index at a seasonally adjusted 148.2, up 2.2% from a year ago.

The latest report came as voters were choosing between President Bush or Democratic challenger Bill Clinton to lead the country for the next four years. The campaign has prompted speculation about policy remedies to jolt the lackluster economy onto a faster track.

Cynthia Latta, an economist with DRI/McGraw Hill Inc. in Lexington, Mass., said the advent of holiday shopping in November and December should keep the economy creeping forward with minimal risk of stalling.

“There would be greater risk under Bush because we expect Clinton is preparing some kind of fiscal package” to spur growth, Latta said.

A Clinton Administration would also be likely to put into effect medical care reforms by the middle of next year that would stimulate growth, she added.

Economists are also watching Friday’s scheduled publication of October unemployment figures, which forecasts say will show 25,000 jobs were created. However, the unemployment rate is expected to be unchanged at 7.5%.

It generally takes 3% growth simply to absorb new entrants to the work force and prevent national unemployment from rising.