If there had been any doubt that the economy is on the edge of a slump, it has been resolved by a batch of new statistics: Industrial output and retail sales have plunged, while manufacturers have announced they are cutting back their plans for expanding factory capacity.
Meanwhile, commodities prices have been sinking, accelerating the disinflation trend that has been under way for some time. And economic growth around the globe is below par: In the United States, where the Reagan administration has been touting the expectation of a real growth rate of 4 percent in 1986, the first-quarter result turns out to be 2.9 percent instead of an earlier announced 3.7 percent.
Clearly, despite the fall in the foreign exchange value of the dollar, American companies still feel strong competition from abroad. Putting it all together, economists inside and outside the government see little in view to alter the lackluster outlook.
A senior Reagan administration official, speaking on background to avoid charges of "Fed-bashing," told me that "the global economy now looks sick." He called for a new round of coordinated interest rate reductions, led by West Germany and Japan.
At the Federal Reserve, there is less inclination to be swayed by the ups and downs of growth estimates for the gross national product, and to pay more attention to long-term price trends: A continuation of the decline in commodities would spell serious trouble for Third World nations, many of which are already deeply in debt. It is easy to see the emergence of a new global recession, and that's why Gov. Wayne Angell of the Federal Reserve Board said in an interview last week that, "at some point in time," global interest rates will have to fall further.
But as is so often the case, the emerging debate will be over timing. If a reduction in interest rates is needed, why not now? The Reagan administration is out front (although not officially) in demanding action by the Fed to help global growth, joining forces with New York financial markets, which would like to see interest rates drop, thus extending the long boom in stock prices.
If the economy is on a 2-percent-real-growth track instead of the 4 percent assumption built into the budget estimates, the deficit reductions painfully achieved by adherence to Gramm-Rudman could be washed away by sharp losses in expected revenue.
The Reagan administration is applying pressure on the Fed with more subtlety than in the past. The unidentified official's call for a "coordinated" move is carefully linked with an acknowledgement that the successful fight against inflation engineered along with the Fed over the past four years can not be endangered. The administration is interested in preserving a detente with Chairman Paul A. Volcker, not in fighting him.
That shifts the burden from the Fed itself to the Bank of Japan and to the West German Bundesbank. For the past six months, there has been an increasing drumfire of demand from American officials, led by President Reagan, for new expansionary moves by the Japanese and West German governments. The heaviest barrage has been laid down against the Germans, who ducked out of the second of two recent coordinated rounds of interest-rate cuts despite zero inflation, high unemployment, and growing trade and current-account surpluses.
The Germans, remembering the way they succumbed to pressure at the 1978 Bonn summit to generate an extra 1 percent growth in their GNP, have sworn, "never again." Their argument is that inflation, rather than growth, may be triggered in their country.
But the stonewalling by the government of Helmut Kohl against the growing crescendo of demands from Washington puts to a severe test the vaunted new cooperative policy mechanism launched by the Group of Five industrial nations at the Plaza Hotel last year, and endorsed by the Tokyo summit just a few weeks ago.
For some weeks now, Treasury Secretary James A. Baker III has been warning Japan and Germany that unless they join in a move to stimulate economic growth, he will renew his "jawboning" effort to depress the dollar -- a step that not only would make German and Japanese exporters unhappy as the yen and mark rise in value, but also could topple Kohl's government and apply the crusher to Yasuhiro Nakasone, who already is skating on thin ice.
So far, there there is little indication that the Germans will change their minds. But central bankers, above all other considerations, look for stability in exchange rates. They have been relatively happy in the last few weeks with signs that the American administration had backed off its public campaign to push the dollar still lower. Perhaps significantly, German central bank President Karl Otto Poehl, in a Boston press conference earlier this month, called for a "pause" allowing for some stabilization and consolidation of exchange rates.
Poehl may be seeing the handwriting on the wall: If American efforts for coordination of policy -- so long demanded by Europeans -- are rejected by the most powerful of the European govenments, the United States, in its own self-interest, could take unilateral action to cut rates.