No Recession in 1986, Say Economists : But Forecast Calls for Business Growth to Remain Sluggish

HOT SPRINGS, Va. — The United States will not face a recession in 1986, but business growth will be sluggish and unemployment is likely to stay above 7%, economists of the prestigious Business Council forecast today.

The council, a group of top corporate executives, was told that the economy will “muddle through” the next 14 months.

“We don’t expect a recession,” said James Robinson, chairman of American Express Co. and vice chairman of the council, at a news conference he said he believes economic growth will be only modest in the foreseeable future.

The report to the Business Council concluded that “despite the expectation of continuing growth, the economy will still face rough sledding, with consumer spending trailing off, fixed investment fading compared with 1985, pockets of severe weakness in areas such as agriculture, and periodic bouts of difficulties in the financial system.”

Inflation to 4.3%

The economists, meeting at a secluded Virginia resort, said inflation should range between 3.2% to 4.3% for this year, and they forecast an even larger range of between 3.4% and 8.9% for 1986, but said the lower figure is more likely.

The study said the lower inflation prospects remain “relatively good” because of slow economic growth, intense foreign competition and falling energy and agriculture prices.

“The weak performance this year stems largely from a deteriorating trade sector, which in large part has been the consequence of an extraordinary appreciation of the dollar between 1980 and early 1985,” the report said in referring to the nation’s 1985 Gross National Product.

The study predicted the GNP will grow by 2.5% next year.

Continued Unemployment

The economists said they expect little relief from relatively high unemployment rates through 1986. They said unemployment, which now stands at 7.1%, should average 7.2% in 1985 and 7.1% in 1986.

The report said inflation “will remain relatively subdued, but some acceleration is expected for next year.”

The pace of consumer spending is expected to slow down, with most households already spending and borrowing what they can afford, the report said.

The group’s executive committee said the federal budget deficit, which is nearing the $200-billion mark, must be reduced to stimulate the economy.