The recent spate of economic news suggests that the U.S. economy went into 1988 on a bit better footing than had been thought and that it continued to grow in January. So far the signs point to at least slow growth but not recession.

Yesterday's report by the Commerce Department that the nation's merchandise trade deficit fell from $13.2 billion in November to $12.2 billion in December was seen by a number of analysts as an indication of more strength in the economy. All the improvement came from increased exports, which points toward more jobs and more hours worked in factories producing goods for foreign markets. At the same time, imports did not decline, signaling that consumer and business spending were holding up reasonably well.

Many forecasters had been expecting economic growth to slow in the first half of this year, and when the Commerce Department reported last month that a big jump in business inventories had pushed the economy to expand at a 4.2 percent annual rate in the fourth quarter, some forecasters became even more pessimistic. A buildup of unwanted inventories usually means fewer orders for new goods will be placed, and therefore production will be lower, until the level of goods on hand is back in line with sales projections.

Those worries were eased somewhat yesterday with the release of another set of figures by Commerce. The department said business inventories rose 0.8 percent in December following even larger increases of 0.9 percent in November and 1.1 percent in October {Details on Page D12}. However, business sales, which had been flat in October and dropped a revised 0.4 percent in November, rose 1.3 percent in December.

The turnaround in sales meant that even though inventories went up again, sales went up more, so the ratio of goods on hand to sales declined. In other words, part -- but only part -- of the slowdown forecasters were looking for in the first quarter actually took place in December.

More evidence that the economy is not about to fall into a recession came yesterday in a report by the Labor Department that producer prices for finished goods -- excluding food and energy -- rose a seasonally adjusted 0.5 percent in January. That measure had been unchanged in November and rose 0.2 percent in December. The pattern does not suggest a weakening economy.

These developments came against a background of more hospitable financial markets. Both short- and long-term interest rates have dropped substantially in the past month, with yields on 30-year government bonds falling by nearly three-fourths of a percentage point to 8.4 percent. Meanwhile, the dollar has stabilized.

Financial analysts were debating yesterday, as they had been for a week or more, whether the Federal Reserve wants lower short-term interest rates. The key federal funds rate -- the interest rate financial institutions charge when they lend cash to one another -- was down to about 6.5 percent from the 6.75 percent level that the central bank had been roughly aiming at for about three months. The Fed can push the federal funds rate lower by making bank reserves more readily available to the financial system.

Many analysts have been expecting the Fed to move to counter the widely predicted slowing of economic growth. "I still don't feel there is proof the Fed has eased," said Alan Leslie, chief economist of Discount Corp. of New York, a major dealer in government securities. "It's impossible to tell definitively."

F. Ward McCarthy, chief financial economist for Merrill Lynch Capital Markets, thinks the Fed has eased modestly, with the one-quarter point decline in the federal funds rate all that can be expected for now.

"The economic news makes the near-term outlook more cloudy," McCarthy said. "The Fed will continue its very cautious approach. It seems to me they are comfortable with lower rates given the fragility of the economy. But they don't want any 'announcement effect' that would destabilize the currency markets."

Sometimes the Fed seeks to lead financial markets in a desired direction by an overt move, such as a change in the discount rate, the interest rate the central bank charges on loans it makes to financial institutions. Some analysts have been expecting a reduction in the current 6 percent rate, but McCarthy said that's not likely right now. "I think they will move over a long time to an easier stance but it will be subtle."

Summing up the latest economic news, he added, "I don't think we are headed right into a recession here, but I don't think we will get through two years without one. There is a shift under way to an export-led economy."

The question, McCarthy said, is whether with consumer spending, business investment and residential construction all weak, export growth will taper off at some point and leave the country in a recession.

As part of its report on the job market for January, released a week ago, the Labor Department said payroll employment rose by 107,000, the first monthly rise of that small a magnitude since last May and June. But employment was still expanding, and other Labor Department figures showed that significantly more industries were increasing employment than were cutting it last month.

The department's index of aggregate weekly hours worked rose in January, wiping out a small decline in December. Components of the index indicated that industrial production probably rose slightly last month. The Federal Reserve will report that figure next week.