Business Notes THE ECONOMY

The economy sent a calming signal last week but abruptly followed it with a disturbing one. First the Government said the stubborn U.S. trade deficit narrowed in January to $9.5 billion, for a $1.5 billion decline from December. Economists were particularly heartened because imports fell nearly 7%, indicating that the economy was cooling off and inflation was not getting out of hand.

But the outlook clouded over on Friday, when the Government said producer prices soared 1% in February. The jump, which showed that such prices have climbed at an alarming 12.6% rate so far this year, aroused fears that inflation might be picking up just as the economy is slowing down. That warning of possible 1970s-style stagflation sent the Dow Jones industrial average down 48.57 points Friday, to 2,292.14, its sharpest one-day decline in eleven months.