Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, October 13, 1995 TAG: 9510130055
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
SOURCE: Associated Press
DATELINE: WILLIAMSBURG LENGTH: Medium
The Business Council, made up of chief executives from some 100 corporate giants, said in a twice-yearly report by its economists that growth slowed practically to a standstill in the spring as businesses pared excess inventories.
``Now that the inventory correction is completed, the economy is expected to return to a more sustainable growth rate of around 2.5 percent,'' the council said.
The report was issued in Williamsburg, where the business leaders are holding their semiannual conference. President Clinton is expected to address the council this evening.
The council said 1997 is likely to be the earliest a recession could hit, and there is a chance growth could accelerate significantly by the end of this year depending partly on the outcome of the federal budget debate.
Government spending will slow next year under any compromise reached by the White House and Congress, the leaders said. ``However, a budget that points toward fiscal balance in the future could stimulate business confidence and investment, fuel the stock market and strengthen housing construction,'' the report said.
There also is a chance that tax cuts next year could exceed spending reductions, the leaders said, giving the economy a short-term shot in the arm.
A few months ago, many economists were concerned that the economy was headed for recession - after booming expansion last year - as growth in the spring slowed to 1.1 percent at an annual rate. Some said the Federal Reserve went too far in raising interest rates seven times over a one-year stretch, dampening consumer spending by raising borrowing costs.
But the Fed ended its credit tightening in July, lowering a key short-term interest rate for the first time in nearly three years. And recent data have pointed toward a modest recovery in the summer and early fall.
The Business Council agreed, placing economic growth in the ``soft-landing'' pattern the Federal Reserve sought.
A survey of council members that accompanied the report of its corporate economists said more than four out of five accepted the soft-landing scenario. Most of the members said inflation will be little changed in the next year, commenting that it is harder to raise prices now than six months ago.
The membership also gave a vote of confidence to the North American Free Trade Agreement. Most credited NAFTA with helping their firms increase exports to Mexico and Canada.
There was overwhelming support for admitting Chile to NAFTA soon, and most said their firms have increased investment and trade with Latin America.
by CNB