The View from Hot Springs, Va.

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Top executives see healthy growth and modest inflation ahead

When the chief executives from 70 of America's largest corporations gathered last weekend at the tony Homestead resort in Hot Springs, Va., for a semiannual meeting of the Business Council, their mood was understandably relaxed and upbeat. The strongest economic recovery in three decades has helped produce a 23% upsurge in corporate profits this year. Between rounds of golf, tennis matches and closed-door briefings from top Government officials, the executives expressed confidence that the business climate will remain favorable, at least through 1985.

That rosy outlook was supported in part by reassuring Government statistics published just as the corporate chiefs were arriving at the resort. The Producer Price Index, a measure of future inflation, fell in September by 0.2%, its second monthly decline in a row. And retail sales during the same month rose by 1.6%.

The council's optimism contrasted starkly with the expectations of four years ago, when members met before the 1980 elections. Then, high interest rates, double-digit inflation and the prospect of another oil-supply crisis caused by the outbreak of war between Iran and Iraq had business leaders worried. This year, with only three weeks to go to the presidential election, and with Ronald Reagan still riding high in the polls, council members are feeling confident. Said IBM Chairman John Opel, whose company last week announced a 21.7% increase in profits for the third quarter: "1984 was a very good year for us, and we have a view of 1985 that essentially says more of the same." Added Harry Gray, chairman of United Technologies, whose subsidiaries (including Pratt & Whitney and Sikorsky) have seen their profits boosted by high Pentagon spending: "The outlook for '85 is excellent."

The executives' confidence was further buoyed by a report of the council's economic panel. It predicts continued expansion next year, fueled by a 6% growth in corporate profits and strong capital investment in plant and equipment. Most important, consumer spending, which accounts for nearly two-thirds of the gross national product, is expected to remain strong. Said Philip Hawley, chairman of the Carter Hawley Hale department-store chain, which includes Neiman-Marcus and Bergdorf Goodman: "Going into the all-important holiday season, consumer confidence to us looks good. It's close to its alltime high." Hawley predicted, however, a slower rate of retail buying next year. That forecast was supported by the council report, which sees consumer spending moving ahead by only 2.5%, compared with this year's 6% gain.

The council's economic outlook, a compilation of forecasts by 20 corporate economists, should prove encouraging to executives and wage earners alike. It predicts that real growth in the G.N.P. will level off next year at 3.5%, a rate that is considered more sustainable than this year's 33-year high of 7.2%. It also foresees inflation remaining in check at 5%, thanks in part to continuing price competition from imports made cheaper by the strong U.S. dollar.