The government's chief economic forecasting gauge plummeted 1.7 percent last month, the steepest decline in more than six years, but analysts were split over whether the setback signals a recession in 1988.

The Commerce Department report yesterday said the index of leading economic indicators was battered by declining stock prices and widespread weakness in other sectors of the economy in November.

It was the first decline in the index since last January and the biggest one-month downturn since a 2.2 percent drop in September 1981, when the economy was sliding into the last recession.

The October figure initially was reported to have declined slightly, but Commerce revised that figure in yesterday's report to show a small 0.2 percent advance.

The administration minimized November's drop. Presidential spokesman Marlin Fitzwater described as a "one-month blip on the screen" that was not particularly worrisome, and said the current recovery from the 1981-82 recession was showing no sign of faltering.

But some private economists said the index could drop again for December and January, given current weakness in consumer spending and other economic sectors.

Richard Rahn, chief economist of the U.S. Chamber of Commerce, said the November decline was the first clear signal that the Federal Reserve has not done enough to stimulate economic growth since the stock market drop.

"Unless {the Fed} accelerates money growth, we are going to fishtail right over the cliff's edge into a recession," Rahn said. "History tells us that the economy inevitably turns down when a major stock selloff is accompanied by a precipitous drop in the rate of money growth."

While the Fed acted immediately after the market plunge to pump money into the financial system, it began withdrawing the excess funds in November because of fears of higher inflation. Some economists, including Beryl Sprinkel, President Reagan's chief economic adviser, have contended that the Fed moves could drive up interest rates at a time when the economy is vulnerable.

Michael Evans, head of a Washington forecasting firm, said he believes the index will record three consecutive declines that will signal the beginning of a recession in February or March.

Evans said what is alarming about the November slide is not the size but that seven of the nine available statistics fell. "This is a very substantial show of weakness in the sense that virtually all the indicators moved in the same direction," he said.

The two indicators that rose were orders for consumer goods and building permits.

Other economists were not as pessimistic, contending that the index was forecasting slower growth next year but not necessarily a recession.

"The economy is stumbling and staggering at this point, but the leading index isn't telling us that a recession is at hand," said Donald Straszheim, chief economist for Merrill Lynch in New York.

Because of the drop in stock prices, the administration said last week that it was revising downward its forecast of economic growth next year to a sluggish rate of 2.4 percent, as measured by the gross national product. This represented a reduction of more than 1 percentage point from its previous 3.5 percent GNP forecast for 1988 and is the most pessimistic administration forecast since 1981.

Two-thirds of the November weakness in the indicator index came from a decline in the monthly average of the 500 stocks included in the Standard & Poor's 500.

The next-largest negative factor came from changes in business delivery times on orders, followed by a slowdown in growth of the money supply, changes in raw materials prices, a rise in unemployment claims, a decline in the length of the manufacturing work week and a fall in contracts and orders for plant and equipment.