(FORTUNE Magazine) – There's little doubt the economy is frazzled. Job cuts mount, consumer confidence wanes, housing starts fall, auto sales idle. But will it fizzle as it did last year, when the slow-mo recovery that began in the spring virtually ground to a halt in the autumn? FORTUNE believes not. Rather, the economy will continue to grow, albeit modestly. Why? Though consumers may be wary of yanking out their wallets, businesses are growing more openhanded. And the recent sag in the dollar, while unsettling to markets and corporate treasurers, will likely help even more. The scariest thing right now for most people -- and voters -- is the mushy job market. Employment has been expanding this year, but only barely. In its latest consumer poll, the University of Michigan found that 45% of respondents in July thought unemployment would worsen during the next year. Only 37% were so gloomy in June. Overall consumer confidence fell nearly four points in July to 76.6. A Conference Board confidence survey showed an additional decline in August. Don't forget, however, that constrained job growth has an upside. Productivity for all non-farm businesses jumped at a 3.8% annual rate in the first quarter -- the best in five years -- followed by a solid 2.3% rise in the second quarter. After-tax corporate profits for the April-June period rose 12% from a year earlier to a record high. Now crank in lower interest rates. They've already affected consumers dramatically by prompting a wave of mortgage applications from people wanting to buy new homes, not just refinance. Sales of existing houses in July surged 4%, which should stimulate additional construction as some sellers trade up to new homes. The effect of lower rates on business is just as significant. The prime rate has dropped half a percentage point and commercial paper rates have fallen nearly a full point since March, which will slice business debt payments by several billion dollars a year. Rates on corporate bonds are down about half a point, which has loosed a flood of refinancings and new issues, saving corporations more billions and financing new capital spending. The combination of lower interest rates and higher profits means companies have more money to spend, giving a lift to business's animal spirits (that highly scientific concept so beloved by economists). Indeed, one good measure of those spirits -- purchases of equipment to raise productivity and output -- has increased this year at a strong annual rate of 13%. The rise is exaggerated by a big jump in second-quarter aircraft deliveries that won't be repeated soon. But look at some other types of equipment and you will find that the news is encouraging. Sales of heavy trucks in the second quarter surged 13% from a year earlier. Jim Hebe, president and CEO of Freightliner, a truckmaker in Portland, Oregon, says, ''Our business in the last 60 days has grown tremendously. There's a lot of freight to be hauled right now. The economy is coming back, and trucking tends to lead recoveries.'' Paccar, which makes the Peterbilt and Kenworth models, also reports increased demand as customers who held on to their rigs for a long time now see enough business to justify new purchases. Economist Diane Swonk, who tracks trucks for First Chicago, predicts a 17% increase in unit sales this year followed by a 14% rise next year, which is a welcome pickup after several years of decline. / Computer companies are clobbering one another with lower prices (see Technology), so you might think users are spending a bit less on bytes. Instead, businesses keep laying out more. In the first half, investment in computers ran at a $39 billion annual rate, vs. about $35 billion in 1991's second half. With all that extra processing power, no wonder companies are making do with fewer humans. Manufacturing orders tumbled in July, caused by a swing in volatile transportation orders. That cast a shadow over investment. However, nondefense capital-goods orders and shipments were both running well ahead of the second quarter, pointing to further gains in equipment purchases. And an August survey by Cahners Economics shows that an increasing number of companies plan to boost capital spending in the next three months. THE LATEST ROUND of dollar depreciation should get business juices flowing faster. U.S. exports will pick up once buyers and sellers adjust. Lea Tyler of Oxford Economics, a consulting firm that specializes in international forecasting, predicts most of the benefits will start to appear in about six months. Increased tourism could aid the trade balance sooner. Importers, faced with higher costs on goods from abroad, will feel pressure to increase U.S. resale prices, reducing their competitiveness. Tyler doesn't believe that will worsen overall inflation much, because the soft economy won't let American companies lift prices. Instead, they will work to win back market share from foreign competitors. Even before the dollar's latest dive, exports were doing well. They hit a record in June, the most recent month reported. Though aircraft played a key role, sales of many other goods such as chemicals, industrial machines, and computers rose too. Economic troubles in Western Europe and Japan certainly damp U.S. business, but only a little over a third of exports go to those regions. The truckmakers, for example, report strong sales to Latin America, the Middle East, China, and Southeast Asia. And for American companies with foreign operations, the weaker dollar will lift profits when foreign earnings get translated back into U.S. currency. With businesses quietly boosting productivity, expanding investment, and pushing exports, the safety net preventing renewed recession seems stretched wide.

BOX: OVERVIEW

-- Rising profits spur a jump in capital investment. -- The lower dollar will aid business by boosting exports. -- Consumers worried over jobs will limit the economy to modest growth.

CHART: NOT AVAILABLE CREDIT: FORTUNE CHART CAPTION: REVVING UP Customers, and calendar photographers, have focused on this $130,000 Freightliner. Growing truck sales show companies are willing to spend.