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FED OFFICIALS FEAR A SLOW RECOVERY

Officials of the Federal Reserve Board and the Federal Home Loan Bank of New York said Monday that although the nation's economy is turning around, they are concerned the recovery could be slow.

In an interview with The New York Times, David W. Mullins Jr., vice chairman of the Federal Reserve Board, and Wyne D. Angell, a Fed governor, said recent improvement in retail sales and housing starts were the most convincing evidence so far that the economic downturn is ending.But they said the manufacturing sector remains subdued and employment growth is likely to lag.

The Commerce Department reported last week home construction jumped 9.6 percent in February to its highest level in nearly two years.

Construction of houses and apartments rose to a seasonally adjusted annual rate of 1.304 million units during the month, the most activity since 1.314 million in March 1990.

Applications for building permits, a sign of future building activity, rose 4.4 percent in February to their highest level since March 1990.

Commerce reported a week earlier that the nation's retail sales rose a surprising 1.3 percent in February from a revised 2.1 percent gain in January for the first back-to-back increase of more than 1 percent in more than six years.

The last time retail sales increased more than 1 percent in consecutive months was in August and September 1985, when sales rose 1.1 percent and 2.7 percent, respectively.

"Taken together the picture is pretty encouraging, but it is not definitive yet," Mullins said. "There are still concerns about sustainability."

Meanwhile, Eugene J. Sherman, senior vice president of Federal Home Loan Bank of New York, said in a statement "early in the year, economic expectations were gloomy and the financial markets were discounting further steps toward monetary ease."

Interest rates reached their 1991-92 trough within the first 10 days of 1992.

"Despite a stable federal funds target, interest rates across the maturity spectrum backed up . . . and while there has been some improvement in the economy, the magnitude of change cannot all be explained by the apparent moderate quickening of business activity," Sherman noted.

According to the FHLBNY "the prospects for further moderate easing by the Federal Reserve are close to nil."

Additionally, the FHLBNY said successive economic data has provided evidence of some modest reacceleration. "