Business Chiefs See 9th Year of Growth Into ’91

The U.S. economy, given two years of rest, can look to an unprecedented ninth year of peacetime expansion in 1991, provided the Federal Reserve tolerates an inflation rate stuck above 4.5%, chiefs of leading corporations said today.

The economy’s advance is expected to taper off to a pace of 1.5% over the next several quarters, but will accelerate to a 3% annual rate by late 1990, said a report by the Business Council, an organization formed by the chairmen of major U.S. companies.

Despite a slowdown caused by higher interest rates, not only can a recession be avoided but “the economy could be headed in 1991 toward an unprecedented ninth year of peacetime cyclical expansion,” the council said.

The report was presented by Chemical Banking Corp. Chairman Walter V. Shipley at a news conference in this Virginia resort, where the council began a three-day meeting Thursday to analyze the economy, the government’s budget policy and the dilemmas of corporate restructuring and leveraged buyouts.

The council met under the chairmanship of Roger Smith, chairman of General Motors.

Consumer Demand Key

Consumer demand will continue to remain the single most important expansive influence in the economy in both 1989 and 1990, while strong economic growth in Europe and Japan will sustain demand for U.S. exports, helping the American economic expansion and reducing the trade deficit to about $100 billion in 1990, from a peak of $152 billion in 1987, Shipley forecast.

However, the council’s report warned that the unprecedented cycle of economic expansion, now in its seventh year, could be jeopardized by a persistent inflation averaging 5% in both 1989 and 1990.

“Would the authorities tolerate the 3% economic growth rate predicted for late 1990 as well as a 50-basis-point drop predicted in short-term rates, with inflation stuck above an annual rate above 4.5%?” the council asked.