Because inflation remains under control - consumer prices rose at an annual rate of only 1.9 percent in September - there is no reason to expect the Fed to drive interest rates up to fight inflation, which is how "classic recessions" develop, Jasinowski said.
The only way a recession may evolve before 1991 would be if consumers were to "go on strike" and slow their buying pace, which appears unlikely, Jasinowski said. Consumer purchases power two-thirds of U.S. economic production.
The association's optimism yesterday was bolstered by the release of the Index of Leading Economic Indicators. Consumer optimism was the strongest single factor lifting the index 0.2 percent in September, the second consecutive month the measure signaled that growth should continue over the next six to nine months.
Nevertheless, the economy is slowing. Industrial production, new housing starts and auto sales have registered worrisome declines recently. The stock market's chaotic slide has added to anxiety.
"The question is how much the economy is slowing, not whether," summed up Allen Sinai, chief economist for the Boston Co. in New York, in a newsletter released Monday.
The economy probably will sputter ahead at a 1.5 percent annual growth rate, as measured by the gross national product, in the fourth quarter, and may slip even more during the first three months of 1990, Jasinowski conceded. That would be a sharp decline from the moderate 2.5 percent annual growth rate recorded from July through September.
Despite the manufacturers' association's forecast that the economy should escape a recession in 1990, Jasinowski was concerned enough about the current slowdown to call for the Fed to "modestly loosen" its grip on the money supply. When the Fed makes more money available, interest rates tend to decline. That, in turns, spurs economic activity.
Jasinowski's position contrasted with 60 percent of the respondents to the association's survey, who said that the Fed should retain inflation-fighting as its top priority "even if it means . . . higher interest rates."
Jasinowski predicted that economic growth would be supported next year by increases of around 4 percent in business investment spending and a further modest improvement in the U.S. trade deficit of around $10 billion to $15 billion.
The merchandise trade deficit has been running at an annual rate of $110 billion this year, down from a $120 billion deficit in 1988.
Jasinowski said the main fear among the executives surveyed about the economy's future centered on the automotive sector, in which sales have been lackluster in the new model year.
The manufacturers' association has 13,500 members. The survey was taken last week at its meeting in Indianapolis.
