The nation’s top corporate executives are optimistic about business prospects, and not even the cloud of further Federal Reserve Board interest rate hikes is darkening their mood.
During their semiannual meeting in this Colonial city, members of the Business Council said they are looking forward to a better-than-expected year thanks to healthy U.S. economic growth and unexpected signs of a pickup in Europe.
“I think the pace of growth is constructive. It is a good pace of growth,” Chemical Bank Chairman Walter Shipley told reporters. “Europe will provide an impetus to the U.S. economy, particularly this time because American industry is much more competitive, much more export-oriented than it was.”
A number of executives reported an unforeseen pickup in European sales in recent weeks. Many said they had expected sales across the Atlantic to remain flat this year as Europe continued to struggle out of the economic doldrums.
“In the last eight weeks, Europe has picked up surprisingly well,” General Electric Co. Chairman John Welch said.
“In general, business is very good all over the world, including Europe,” AlliedSignal Inc. Chairman Lawrence Bossidy said.
But the picture with one of America’s most important trading partners, Japan, was not so bright.
“In Japan, we see no sign of life,” Welch said.
The executives said they do not believe that recent and anticipated moves by the Fed to raise short-term interest rates will slow sales appreciably or discourage businesses from making planned investments.
“We are all in favor of keeping the lid on inflation,” American Telephone & Telegraph Co. Chairman Robert Allen said.
Since February, the central bank has raised short-term interest rates three times in an effort to slow growth and reduce the likelihood of a buildup of inflationary pressures.
Many economists believe Fed policy-makers will decide again Tuesday to raise rates when they meet to determine the course of monetary policy over the next several weeks.
Dennis Weatherstone, chairman of J.P. Morgan & Co., said the Fed is doing the right thing and needs to move its credit policy to a more neutral stance after being accommodative for the last few years.
“I think there is more (economic) activity and there is growth, and therefore you don’t need an accommodating monetary policy,” he said.
An economic outlook released by the prestigious business group predicted the U.S. economy will expand by a healthy 3.1% from the last three months of 1993 to the end of 1994.
Inflation has probably hit bottom for the current business cycle, the forecast said. But it did not call for prices spiraling out of control. Instead, the group predicted that prices will remain flat or increase slightly, with inflation of 4% or less.
Consumers appear to be resisting price increases, but some industries are finding the ability to raise prices slightly.
Edgar Woolard, chairman of DuPont Co., said his chemical firm in recent weeks has been able to recapture some of the price erosion suffered during the last few years of global economic slowdown.
“Our business has improved considerably since we were here six months ago,” he said.