SEVERAL current measures of the economy suggest it isn't going anywhere very fast. That's better than going downhill. But, given the dynamic processes always at work in economic affairs, a slowly growing economy can also easily crest and start down that hillside. One hears more talk of a growth recession. Indeed, in looking at where the United States economy has been since last summer, the pattern of a growth recession -- one in which growth is too slow to bring down the unemployment rate -- begins to emerge. Last week the Federal Reserve Board released the April index of industrial production. It was off 0.2 percent for the month, falling slightly below its level of last summer. The capacity utilization figure also dropped slightly, from 81.1 to 80.6 percent.
The difficulty with the statistics we have on the production side is that they are best at measuring the production of things. As the economy becomes still more service-oriented, the output of the nation's factories and mines doesn't have quite the same meaning it did a generation ago.
As an example, look at the farming industry. Back in the 1920s, trouble on the farms gradually spread into the rest of the nation and was a major cause of the depression that began in 1929. Today, we have had several years of difficulties on the farm, but it looks as if farming can no longer bring down the national economy.
One cannot say that about manufacturing. With roughly 25 percent of the jobs found in this category, weakness there would begin to spill over into the rest of the economy. This is one reason economists are concerned at the overvalued US dollar. Consumers have been using their growing incomes to buy more foreign goods instead of domestic goods. Retail sales, also announced last week, grew 0.9 percent during April. And consumer installment debt, which has been growing at an annual rate of more than 20 percent for a year now, was up another $8.3 billion in March. The growth in consumer spending seems to be matching the growth in imports, however, with no net benefit to domestic suppliers.
Normally, the economy does not dip into recession without some kind of credit crunch. At the moment, interest rates are actually dropping. It may be that lower interest rates will prolong this period of expansion. That's one reason most economists still expect the economy to keep growing well into 1986.
The power of lower interest rates to propel the economy isn't clear, however. Corporations are not going to make their borrowing decisions dependent on another drop in the prime rate. Individuals, as noted, have already been borrowing at record levels, and the ratio of installment debt to personal income is already higher than at the start of any of the last four recessions.
There are often moments in an economic cycle when one can look at the glass as either half empty or half filled. The perpetual optimist (or pessimist) doesn't have much trouble knowing which way to look at it. But it's really not that easy, and this column is meant to record that this is one of those difficult moments.
Perhaps swift agreement on a budget that reduces the federal deficit by $50 billion or more will help clear the economic air. But last week's decision by the Democratic-controlled House Budget Committee to cut defense spending below the level the President agreed on in his compromise with Senate Republicans indicates a final budget is still a long way off.