There are valuable lessons to be learned from a billion-dollar error federal officials made in reporting a decline in government spending in the Washington area last year, a report that fed anxieties about the the slowdown in the region's economy.

The first lesson is obvious enough. A better job of analyzing the data on which these reports are based will have to be done in the future if they're to be considered valid indicators of economic activity.

That applies to the government agencies that are responsible for compiling and analyzing the information, as well as to the Greater Washington Research Center, which has used the results since 1984 as the basis of its own reports on federal spending in the area.

Only recently, the research center learned that the initial data provided to the Census Bureau by the Federal Procurement Data Center (FPDC) were incorrect. Federal purchases in the area actually rose 5.2 percent, to $11.2 billion in 1989, instead of declining 9.6 percent to $9.6 billion, as previously reported by the agencies involved.

That's a lot of egg on a lot of faces -- $1.6 billion worth, if you calculate the difference between $9.6 billion and $11.2 billion. There was actually a $550 million increase last year compared with the $10.65 billion the federal government spent locally in 1988.

"For five months, at least {beginning} some time in May, both agencies knew the tape was wrong. They never called us. They just sat on it," complained an angry Atlee Shidler, president of the research center.

Having been burned, research center officials vowed last week to do a thorough analysis of computer tapes in the future before releasing the reports on federal spending. But what about others who have come to rely on the report as a leading indicator of economic activity in the region? Surely there are lessons here for them also.

The report, never anything more than a look at spending activity in the prior year, has been widely regarded in the past couple of years as a genuine harbinger of bad times.

In 1987, federal spending in the area totaled $11.41 billion, 5.81 percent of government purchases nationwide. Locally, federal spending declined 7 percent in 1988, but was only slightly less than the $10.65 billion the government pumped into the area's economy two years earlier.

Business and government leaders began to express considerable concern that the federal government's role in the local economy was shrinking even more. Government employment had already declined substantially, so this had to be the other shoe, some had suggested. Many, in fact, had begun to dismiss the importance of the federal government's presence as the driving force behind economic growth locally. Growth in the area's private sector was widely hailed as the primary reason for the rapid expansion of the economy during the 1980s.

Nevertheless, when the Census Bureau and the research center initially reported that federal purchases were off 9.6 percent in 1989, the decline was immediately interpreted by business and government officials as evidence that the local economy had begun to tip over into a nose dive.

The slowdown did come, but it was concentrated in the ports of the area's economy -- real estate, banking and retailing -- that had very little, if anything, to do with the amount of spending by the government.

The psychological effect of the erroneous federal spending report had taken hold, however, just as a crisis mentality had been spawned by other indications of a slowdown.

Postponement of expansion plans and staff cuts were made in anticipation of further reductions in federal spending, not because the federal government had suddenly become parsimonious. There was little to suggest in 1989 that the government had cut back drastically on its purchases of goods and services -- from paper clips to pies to computer programs -- from Washington area contractors.

Relying on data from the FPDC, however, the research center concluded in a report six months ago: "Federal purchases from Washington area firms fell in 1989 for the second consecutive year, following a long and previously uninterrupted rise. The 1988 and 1989 cutbacks represent a total reduction of 15.8 percent. Obviously, this reduction has potential negative impacts not only for the firms involved, but also for the area's overall economy."

Elsewhere in the report, the center noted: "There has been an estimated decrease of approximately 20,000 direct contractor jobs in conjunction with the two-year drop in federal procurement levels."

Someone should have questioned the validity of the reported cutbacks, considering the stability in employment at the time. The area's unemployment rate then was only 2.5 percent. It has edged up above 3 percent since then but now we know that it isn't because the government tightened its purse strings in the Washington area. Only once before -- in 1987 -- had the government spent as much as $11 billion in the Washington economy.

In fairness to the research center, it did note in its report six months ago that the economy "has been able to generate several times as many new jobs as have been lost" as a result of the decrease in contractor jobs, "contributing a net gain three times as great as the loss from procurement cuts."

Still, the reported decline psychologically was "a big downer" for a good many people, as Shidler angrily noted last week after learning of the mistake by the FPDC.

Now we know that the screw-up at the FPDC wiped out half a billion dollars that should have been included in the 1989 total.

Consider that in terms of the real effect such a loss would have had on the local economy. That's more than the total revenue of any company ranked below 17th among the top 100 public firms in the area.

The $1.59 billion difference between the bogus 1989 total and the corrected figure is more than the revenue reported last year by each of several major Washington-area firms, including Ryland Group Inc., Hechinger Co., Potomac Electric Power Co. and The Washington Post Co.

Surely the loss of an amount that great would have been noticed before now.

A comment last week by John R. Tydings, executive vice president of the Greater Washington Board of Trade, is probably the best indicator of the state of mind that existed in the wake of the erroneous report on federal spending.

"I think when you put {the revised spending figure} in perspective it gives us a little more sense of security, that we're not in a free fall," Tydings said.

The mistake at the FPDC and the delay in reporting it turned out, ironically, to be a blessing in disguise.

There's some good news about the economy for a change.