Key Economic Signs Show Big Drop in March : Forecast: The index of leading indicators falls 1%, the steepest dive since November, 1990, signaling slow growth.

WASHINGTON —  The government’s chief economic forecasting gauge recorded its worst drop during March in more than two years, signaling lethargic growth this year. “There’s no real oomph,” an economist said.

The index of leading indicators fell 1%, the sharpest decline since November, 1990, in the middle of the recession, the Commerce Department reported Tuesday.

At the White House, President Clinton used the report to prod Congress to enact his proposed budget deficit cuts, which he said would stimulate the economy by keeping interest rates low.

“The best thing we can do for the economy this year clearly is to pass a multi-year deficit reduction plan because of what it will do to interest rates,” he told reporters in the Oval Office.

He said at the moment he does not plan any new initiatives, but “I wouldn’t rule anything out down the road.”

His press secretary, Dee Dee Myers, blamed the economy’s sluggishness on Clinton’s Republican predecessors’ “failure to invest” and warned that it “cannot be fixed overnight.”

The index is designed to predict economic activity six to nine months in advance. Three consecutive declines are a good, although far from foolproof, sign of a recession ahead.

Economists said the index’s movements so far this year signal sluggish growth rather than a renewed recession. The index rose 0.5% in February, edged down 0.1% in January and jumped 1.7% in December, the biggest increase in 10 years.

“I don’t think we’re headed into some dark night. . . . It’s just that there’s no real oomph,” said economist Paul W. Boltz of T. Rowe Price Associates in Baltimore.

He attributed the latest drop partly to a blizzard that hit the Northeast in mid-March, but said it also reflected fundamental problems. These include employers’ reluctance to expand their payrolls and weak export sales to troubled economies in Europe and Japan.

Economist Mark M. Zandi of Regional Financial Associates in West Chester, Pa., said U.S. growth is unlikely to return to the fourth-quarter rate--4.7% as measured by the gross domestic product--anytime soon. GDP grew an anemic 1.8% in the first quarter.

However, Zandi said he expects a gradual pickup, to around a 3% rate, by late in the year, after employers get a better idea of how Clinton’s proposed tax increases and health care reforms will affect them.

“Each day you pick up the newspaper there’s another trial balloon, and that uncertainty is making employers cautious. . . . They want to hold off on hiring until they find out a little more,” he said.

In March, nine of the 11 components that make up the index contributed to the decline, led by sharp drops in building permits and the average workweek and a rise in claims for jobless benefits. Taken together, the declines portray weakness in the vital construction sector and the job market. In order of their effect on the index, from largest to smallest, the negative indicators were:

* A decline in building permits.

* A rise in new claims for unemployment benefits, to 376,000 in March from a weekly average of 343,000 in February.

* A decrease in the average workweek at factories, to 41.2 in March from 41.5 hours in February.

* A dip in consumer confidence as measured by a University of Michigan survey, the third in a row.

* A decline in orders and contracts for new commercial buildings and business machines such as factory equipment and computers.

* A drop in new orders to factories for consumer goods.

* A decrease in the inflation-adjusted money supply.

* A speedup in delivery times from factories, a sign of falling demand.

* A fall in the inflation-adjusted backlog of orders at factories, a sign that the current work force is having little trouble keeping up with demand.

Economists said building permits, unemployment benefits and the workweek probably all were affected by the March storm.

Two indicators were positive. Stock prices, as measured by the Standard & Poor’s 500, rose. The prices of raw materials rose, a sign of increased demand.

The various changes left the index at a seasonally adjusted 152.0, up 2.8% from a year ago and down 0.6% from three months ago.

Index of Leading Indicators Seasonally adjusted index 1982=100 March, 1992: 147.9 March, 1993: 152.0 Source: Commerce Department