The government index designed to signal turning points in the business cycle fell during February for the third time in the past four months, but analysts said it merely confirmed the current situation and did not point to an imminent recession.

Commerce Department figures showed the "index of leading indicators" dipped 0.9 percent over the month following a revised drop of 0.3 percent in January. Six of the 10 components available for this preliminary estimate contributed to the decline.

The figures came as, separately, the Agriculture Department reported that farm prices rose another 2 percent in March - mostly because of higher cattle prices - to a level 23 percent above that of a year ago. The development points to further sharp hikes in retail food prices.

At the same time, the Commerce Department reported that factory orders increased a hefty 1.4 percent in February, reflecting continued steam in the industrial sector of the economy. Factory orders rose a revised 1.5 percent in January.

The decline in the leading indicators index appeared discouraging, at least on the surface.

Once again, however, some of the developments that helped push the index down - such as a cutback in the growth of the money supply - are regarded by economists as welcome. And in other instances, such as a decline in building permits, analysts expect a reversal in March.

As a result, economists said that rather than forecasting any shift, the index more nearly reflected what is going on in the economy right now - that is, a continuing boom in the industrial sector, offset in part by a slowing in other segments.

Several analysts said they expect the leading indicators index to bounce back up in March. The index declined 0.2 percent in November and rose 0.4 percent in December before dropping again in January. Earlier, the department had estimated the January dip at 1.2 percent.

The report marked the latest in a series of clouded, sometimes conflicting government economic statistics that appeared to reflect both overheating in the industrial sector and the beginning of a slowdown in other areas. Many of the recent figures have been distorted by bad weather.

Yesterday's statistics contained a new wrinkle in the department's calculation of the index - the use of a broader measure of the money supply, in an effort to provide a more accurate assessment of developments in the monetary aggregates.

In previous months, the index was calculated using the narrow M-1 measure of the money supply, which includes only currency and checking deposits. The February figures, however, were compiled using the broader M-2 definition, which includes time deposits at commercial banks as well.

Officials said the change, made at the recommendation of department economic consultants, is only an interim step, and eventually the agency may adopt an even broader measure of the money supply. The index for previous months was recalculated using the M-2 measure.

The six indicators which contributed to the February decline were the length of the average work week, change in total liquid assets, stock prices, money supply in 1972 dollars, new orders in 1972 dollars, and building permit levels.

Three other indicators tended to bolster the index-vendor performance, change in sensitive prices and contracts and orders for plant and equipment in 1972 dollars. A tenth indicator, the layoff rate, was unchanged from January.

The February decline brought the index to a level of 142.3 percent of its 1967 average.