A Reagan administration economist said yesterday "it is hard to believe that we can have rapid growth next year" under the Federal Reserve's current monetary policy.
Robert Dederick, assistant secretary of Commerce for economic affairs, made his prediction at a news conference as Fed Chairman Paul Volcker was reaffirming before the Senate Banking Committee the need to continue the tight money policy backed by the president.
Statements from the two men came as the government released more evidence that the nation is heading deeper into recession.
The nation's index of leading indicators dropped by 2.7 percent in September, the sixth monthly fall this year and the largest drop since a 4 percent decline in the midst of the 1980 recession.
Although the drop may have been somewhat exaggerated by technical factors, few analysts doubt that the economy is now contracting. Other figures released yesterday showed that business productivity fell by 2.2 percent in the third quarter, measured at a seasonally adjusted annual rate.
One piece of good news was the report yesterday that Continental Illinois of Chicago lowered its prime interest rate by 1/2 point to 17 1/2 percent. Short-term interest rates have begun to decline as the recession has choked off some private-sector credit demand.
Administration economists now working on new forecasts have admitted the new numbers will slow down the pace of next year's recovery. This will automatically widen the projected budget deficit as tax receipts grow more slowly and expenditures more rapidly when the economy is sluggish.
Budget Director David Stockman warned this week that without further congressional action very soon it would be very hard to keep to the administration's deficit targets of $43.1 billion for 1982 and a balanced budget by 1984.
Meanwhile, Treasury Secretary Donald Regan said in remarks prepared for delivery to the Chicago Economic Club last night that there will be several more months of disappointing economic statistics but the administration is determined not to hit "the panic button," United Press International reported.
Regan said that "powerful forces" are already at work turning areas of weakness into sources of economic strength, and added, "I believe the current recession will be mild, its end certain and swift."
High interest rates and tight money have triggered the current recession, economists agree. The housing and auto sectors have been particularly hard hit by the high cost of money, and this has now spread to other sectors of the economy, Dederick said. He emphasized, however, as have some other administration spokesmen, that Reagan backs the Federal Reserve's tight money policy as the only way to bring down inflation.
Dederick said yesterday that the money targets next year would be a constraint on how much the economy could grow given a certain level of inflation.
Volcker told the Senate Banking Committee yesterday that it's "quite possible" that the economy is in a recession but that it would be premature to say so definitely.