(FORTUNE Magazine) – It's in the air, everywhere: recession scare. Most FORTUNE 500 CEOs responding to the magazine's latest survey expect one soon (see The Economy/CEO Poll). More than half the Blue Chip consensus now forecasts a downturn before the end of 1991. You can barely have a drink after work or read a newsmagazine without running into the flat assertion that the economy is already in the tank. Could the U.S. talk itself into decline? Probably not. No recession in recent memory has begun without major imbalances, such as excess inventory, or a shock much bigger than the rise so far in oil prices. Uncertainty can derail an expansion if it makes enough people put their plans on hold. But barring another body blow, FORTUNE isn't writing off this one yet. The growth we look for will be nerve-rackingly feeble -- but it will continue. Despite some jitters, both businesses and consumers are demonstrating considerable staying power. Consumer confidence as measured by the Sindlinger & Co. index has inched back up after its post-Iraqi low. The Conference Board's index, a monthly sampling taken immediately after the invasion, dropped like a stone. But consumers' overall buying intentions declined only marginally. In fact, plans to purchase major appliances jumped in August after falling for four months. And despite higher gasoline prices, plans to take an auto trip within the next six months rose as well. The action speaks even louder than the words. Car sales were respectable at a 9.4 million annual pace in August and a 7.1 million rate for domestic cars in early September -- a 3% rise. Sales of some other merchandise continued to increase in August, notably furniture and household items. Elsewhere sales were weak but didn't collapse. FORTUNE expects that total consumer spending excluding inflation will increase at a 1.5% annual rate for the rest of this year and next. Business is acting more courageously than it is talking. Check that CEO poll closely and you'll note corroboration for the latest Department of Commerce capital spending survey: Executives have scaled back only a bit on planned 1990 expenditures for new plant and equipment. The negative spin imparted by the financial press to the survey -- ''capital goods outlays will grow by only 5.1% this year'' -- is off the mark. Actually, we think capital spending growth won't come in anywhere near that. Uncertainty and the downbeat psychology could drive some executives to delay projects. But outlays will at least hold steady at their $515 billion annual rate over the next few quarters, and more likely will rise a little. Exporters continue to provide the major muscle for the economy. Leaving aside some monthly bobbles, volume is growing in every category, with the strongest gains in capital equipment and consumer goods. Improvement in the total balance of trade will be limited by the higher cost of imported oil. But the dollar's fall of the past few months may help cut demand for other imported goods -- and it can only help U.S. manufacturers capture market share. GNP growth will suffer a little less drag from Washington than was planned for, and that is just as well. (State and local governments are also doing their Keynesian bit for growth; see next story.) Despite some help from other countries, the Middle East deployment will push Defense Department outlays higher. Congress and the Administration will lean on the Middle East situation as an excuse to scale back deficit cutting for fiscal 1991. Instead of $50 billion, or the $35 billion that FORTUNE expected at midyear, look for something closer to a $20 billion deficit reduction package. The economy can live with that.

BOX: OVERVIEW

-- Consumers and business show staying power. -- Strong exports will add to the economy's momentum. -- Spending for teachers and public works will help fend off recession.

BOX: FORTUNE'S BASIC OUTLOOK

-- Growth: Real GNP will expand 1.5% during both 1990 and 1991. -- Inflation: GNP price increases will climb from 4% during 1989 to 5.5% in 1991. -- Interest rates: Next year they will be up a percentage point from the spring lows.

CHART: NOT AVAILABLE CREDIT: NO CREDIT CAPTION: State and local government spending INVESTING IN THE FUTURE Budget constraints won't keep governments from spending more, especially for new employees like this freshly hired Los Angeles teacher.