June 14, 1985

The man identified by associates here as Josef Mengele, the long-sought fugitive Nazi war criminal, led a reclusive life for nearly two decades in and around Brazil's largest city, according to neighbors, friends and a housemaid who says she loved him. They portray the man as an authoritarian figure, but also as someone who was cultivated and sometimes charming. They say he spent his days at secluded farms and simple cottages, tended sick animals, disparaged black people, kept a diary but never publicly discussed history or politics, and liked to watch ''Disneyland'' on television. The accounts, given in news interviews and in depositions to the Brazilian police, help explain how the man -if indeed he was the Auschwitz death-camp doctor - managed to escape his pursuers for so long only to drown, as his former protectors here say, in a swimming accident in 1979. Many Questions Unanswered In fact, the story that is now emerging of a robust but lonely exile bears almost no resemblance to the often lurid accounts over the years of a surgery-altered Dr. Mengele, surrounded by armed guards, torturing Indians or serving as the personal physician of President Alfred Stroessner of Paraguay.

Retail sales in May sagged eight-tenths of 1 percent from April, the sharpest drop since last summer, the Commerce Department said today. But some private analysts agreed with the Reagan Administration that consumer demand remained adequate to sustain modest economic growth. ''The expansion still has a green light,'' Commerce Secretary Malcolm Baldrige said.

A picture caption yesterday with an article about the signing of a treaty admitting Spain and Portugal to the Common Market misidentified Giulio Andreotti. He is Foreign Minister of Italy.

The Administration announced today that it would seek a $250 million increase in economic aid to Jordan as a show of support for what it said were King Hussein's efforts to move toward peace negotiations with Israel. But because of strong Israel-backed opposition in Congress, President Reagan today deferred any decision on a military aid package for Jordan, White House officials said. Mr. Reagan telephoned King Hussein, who is in London, to tell him of his continued backing but to explain his reluctance to seek the arms aid now. Richard W. Murphy Jr., Assistant Secretary of State for Near Eastern and South Asian affairs, was also sent to London to meet with the King.

Stocks tumbled yesterday for their third decline in a row, hurt in part by lingering fallout from a projection of lower profits at I.B.M. The Dow Jones industrial average lost 16.24 points, to 1,290.10, closing below the 1,300 mark for the first time since May 23. The Dow transportation average fell even more sharply, losing 12.53 points, to 629.68, largely on weakness among airline stocks. That was caused in part by profit taking after the group's recent strong showing. Volume on the New York Stock Exchange expanded to 107 million from 97.7 million on Wednesday.