The economy yesterday showed new signs of a slowdown, with reports that retail sales rose a scant 0.2 percent last month and production at the nation's factories, mines and utilities declined in June for the fourth time in five months.
The reports came as the administration prepared a midyear revision of its economic forecast, which originally called for growth of 4 percent from the fourth quarter of 1985 to the fourth quarter of 1986. The revision, to be issued in a few weeks, will lower the forecast to about 3.5 percent, but still will call for a second-half rebound to 4 percent or better, an administration official said yesterday.
Economists in both the government and private sectors agree that the economy should improve in the second half, but doubt that growth will reach a 4 percent rate. Widespread pessimism about the economy is blamed on Wall Street for the recent slide in stock prices, which has sent the Dow Jones industrial average down about 140 points, or 7.4 percent, in the past two weeks.
The major reason for the administration revision was the slow growth in the first half of the year, not expectations of a slowdown in the second half, the administration official said. "We're still forecasting a brisk rebound in the second half," the official said.
In the first quarter, the economy expanded at a rate of 2.9 percent. Many economists believe the report for the second quarter, to be issued next week, will show slower growth.
James C. Miller III, director of the Office of Management and Budget, said Monday that the federal budget deficit will be about $10 billion higher than expected, largely because of sluggish economic growth.
Many private economists have lowered their estimates for growth for the year to less than 3 percent, and say they no longer expect a brisk rebound in the second half. The statistics released yesterday tended to confirm that outlook, the economists said.
The Commerce Department reported that retail sales rose 0.2 percent in June, following a revised increase of 0.7 percent in May. The government earlier had estimated a decrease of 0.1 percent for May.
Brisk automobile sales helped boost overall sales. Excluding automobiles, retail sales in June were unchanged, Commerce said.
In a separate report, the Federal Reserve Board reported that the nation's industrial production fell 0.5 percent in June, following a 0.4 percent decline in May. Manufacturing production fell 0.5 percent in June, the second consecutive monthly decline, while mining output dropped 1.5 percent, following a 1.7 percent fall the previous month.
Commerce Secretary Malcolm Baldrige said yesterday that he expects consumer spending to increase. Consumer spending accounts for about two-thirds of the nation's economic growth. "High consumer confidence and low interest rates and inflation favor continued growth in consumer spending," Baldrige said.
But private economists have lowered their forecasts, citing the economic havoc wreaked by the collapse of the oil industry.
For example, Blue Chip Financial Forecasts, a private firm that surveys other forecasters, reported that a poll of 52 economists last week produced an estimate of GNP growth for 1986 of 2.5 percent, down from 2.8 percent last month.
Earlier this year, the government and private analysts had said that the sharp declines in oil prices would give consumers and businesses more spending power, which, in turn, would give the economy a boost. However, the oil price decline has resulted largely in layoffs, steeply lower production and a curtailment of spending in the southwestern states dependent on the oil business.
The Federal Reserve Board last week helped push down interest rates in a further move to stimulate economic growth, which had been relatively unresponsive to previous rate declines, economists said.
The economic news reported yesterday "certainly doesn't provide any optimism," said Nariman Behravesh, chief U.S. economist for Wharton Econometrics. "Earlier this year, we had taken a fairly bullish stand on the economy. I still feel the fundamental forces will result in an upturn in the economy. The question is when."
Wharton has shaved its estimate of economic growth for the year from 3 percent to 2.5 percent, Behravesh said.
"I think the situation hasn't really changed much in recent months," said Lawrence Chimerine, chief economist for Chase Econometrics. "If anything, it might be a little weaker.