In a move reflecting growing uneasiness here, the West German government yesterday urged local authorities throughout the country to crack down the sharp increase in Nazi propaganda.

The letter by Justice Minister Hans Jochen Vogel warned of public concern over the growing sales and availability of Nazi-era recordings, literature and even toys with Nazi symbols. He reminded authorities that use of Nazi-style propoganda and insignias such as the swastika was punishable under West Germany's post-war constitution.

The minister's public statement was the second in six months on the same theme by a ranking West German political leader.

In July, former chancellor Willy Brandt wrote to Chancellor Helmut Schmidt reporting complaints he had received from citizens that peo-Nazi activities were taking place openly in some areas without being firmly stopped by local authorities.

The dilemma for the federal government is two-fold.

Though the neo-Nazis here are, as Brandt pointed out, "a tiny minority" and play no role in West German life or politics today, their activities in several cities are becoming increasingly more open and therefore an increasing concern for the Bonn government and its image.

Secondly, the actions of Nazi groups, usually clusters of a few dozen young people, are becoming more overtly anti-Semitic, which is feature that remains extraordinarily sensitive here and periodically attracts the attention of the foreign press, including that of East German."

Last week, the mass circulation West German news magazine Der Stern reported in a lengthy article that "Hitler's grandchildren are acting obnoxious and violent."

The situation is further complicated by the development last summber of what has come to be known as a "Hitler nostalgia wave," which is a not quite accurate description of a barrage of new books, films and articles about Adolf Hitler that rather suddenly appeared after the subject had been left largely untouched in the popular media for 30 years here.

Much of what appeared was serious and, as some critics viewed it, healthy in terms of helping Germans, especially young ones, comes to grips with this country's recent past. Others viewed it as dangerous for the same young people, most of whom had learned very little about Hitler in school.

Whatever the truth, the period seems too have clearly emboldened the neo-Nazis who, in terms of activist members, may be fewer in number than their counterparts in the American Nazi movement.

Ironically, the West German Interior Ministry in its 1976 annual report said that the neo-Nazis here had substantially stepped up their contracts with the American Nazi operation run by Gary Lauck in Lincoln, Neb.

Propoganda with the made-in-Nebraska mark on it has showed up all over West Germany in recent years and police officials in Lower Saxony - a state that has had several signficant episodes of Nazi-style anti-Semitism in the past year - claim that the U.S. Group has also been supporting its German counterparts financially in addition to supplying leaflets, emblems and propaganda.

Though there may have been no more anti-Semitic and neo-Nazi style activities here in recent years than in some other Western countries, there does appear to be an increase now in such public displays.

But there also appears to be an important upsurged in public protest over such acts that in large measure is directed at police and local authorities who do not seem to be using laws to crack down on them.

For example, while Hamburg police claimed to have a small group of "blackshirts" well under control, it took a formal complaint by a Social Democrat parliamentarian to force authorities to forbid a meeting of the neo-Nazi "National Socialist action front" lead by Michael Kuehen, 22, a former army lieutenant. The meeting was eventually held elsewhere while West German television filmed it. The police made no move to stop it.

In Hannover, where there have been several ugly incidents recently involving some of the city's 400 Jews, the state interior minister, Roetger Gross, describes these as the work of perhaps a dozen "young idiots" who are known to the police.

Police officials have advised the Jewish community, according to Jewish leaders, not to overdramatize the situation so as not to encourage the Nazis and make it worse.

Yet the Hannover newspaper reported Friday that school officials, labor leaders, lawyers, artists and politicians formed a local citizens action group to work against these neo-Nazi activists and to force the state and the police to take action.

The paper, which first reported the anti-Semitic incidents, points out that Hannover police formed a commission on the problem several months ago with no observable results and that Nazi-style propaganda and advertising has been floating around the city center for two years although it is technically illegal.

Officials claim last year there were more than 80 court suits filed against neo-Nazis on a variety of charges ranging from illegal displays of swastikas to handling out propaganda.

In West Berlin, the name and number of one of the most militant Nazi "fighter groups" is now listed in the local telephone book.

In Hamburg, Hannover, Berlin, Frankfurt and a number of other cities, Jewish cemetaries and some 2,000 tombstones have been desecrated over the past year in the kind of activity which also goes on elsewhere but which is more sensitive here and which authorities believe is hard to stop and is carried out by bands of youngsters.

In Munich last fall, the West German army suspended 11 young officers accused of holding a mock burning of Jews during a drinking party at a military college. In Bremen a few weeks ago, 11 young men wearing full Nazi regalia marched through the streets singing the Hitler-era Nazi party "Horst Wessel" song. When police in Duesseldorf stopped a car for speeding, they found both occupants wearing full Nazi uniforms.

There are numerous other incidents. But, as the vast majority of West Germans quickly point out, they still add up to a tiny number of people in a country of 61 million and in a society that is now among the most democratic in the West.

Ten years ago, things were more tense when 1.5 million West Germans voted for the legal but extreme right-wing National Democratic Party. Since then, that party has ceased to be represented in any legislature, receiving only 122,000 votes out of 38 million cast in the 1976 federal elections.

The Interior Ministry report for 1976 said there were some 142 extreme right-wing groups with 18,300 members, including the NPD members. The ministry differentiates between these and hard-core neo-Nazis groups, however. Though there are no official estimates of the actual number of neo-Nazis, there were believed to be perhaps a few thousand.

In its reports, the ministry claimed that though there had been an increase of a few hundred in neo-Nazi group membership and a 50 percent increase in their illegal actions, these actions were mostly carried out by individual fanatics and that these groups were completely rejected by the public and posed no threat of a Nazi revival.

At the time, Interior Minister Werner Maihofer also said, "The mass media at home and abroad often devote disproportionate attention to their activity."

Since then, however, Brandt and now Justice Minister Vogel have both sought to publicly call attention to the situation.