(FORTUNE Magazine) – Among the best economic news lately count the continuing optimism of business executives. Nearly 70% of those responding to FORTUNE's quarterly survey say they are confident about the next few years. That's almost as many as at the peak three months ago. Of course, anyone who wants to worry has plenty to chew on. Inflation and wages ticked up in July, so bond traders and the Federal Reserve will fret about overheating. Conversely, consumer spending grew very slowly last quarter, leading some economists to worry that a mound of unwanted inventories piling up at stores and warehouses is about to bury the expansion. But early returns on the summer's business activity suggest that the alarms on both fronts should be muted. Consumers are shaping a healthy transition from last quarter's unbalanced growth rate, when most of the 3.7% advance in real GDP came from inventory accumulation. Total consumer spending, up at a minimal 1.2% pace then, has already strengthened. After staying home earlier in the spring, shoppers came back to the stores in June. Excluding auto dealers', sales rose again in July. At the same time, slow-growing incomes won't allow a return to the aggressive spending habits of 1993 and early 1994. (See box, next page.) Are inventories really a worry? Probably not, for a number of reasons. First, the ratio of inventories to final sales rose only a percentage point, despite the humongous jump in stockpiling to an annual rate of $58 billion in the spring. And as the chart on the next page shows, the ratio is still extremely low. Second, a lot of last quarter's unsold goods were imported. Cutting back on imports, if retailers and wholesalers want to lighten their shelves, will play less havoc with the economy than turning off the lights early at American factories. A more important reason not to beat the breast about inventories: Business executives tell FORTUNE that the buildup doesn't worry them. Sixty percent of those surveyed, the most in nearly five years, are willing to risk having too many goods on hand rather than risk running out of items and missing sales. That's a bet on the future, but it also represents current reality for many firms. For example, an appliance dealer from Warren, Michigan, reports waiting two months for popular products and doesn't want to run short again. In another case, a Cleveland-based producer of painting materials notes that he has suffered from shortages of some raw materials in recent weeks. He is ordering extra now. And the controller of a waterproofing and coating- materials manufacturer, also in Cleveland, says he's anxious to build inventory now because his company has labor talks coming up later this year. Business executives do have serious concerns. Higher interest rates received the most mention, as in the spring survey. But only 10% say they've changed capital spending plans because of the recent rise in rates, and even fewer say their hiring plans have changed. The real worry is about the effect on their customers. Forty percent of those surveyed say they've already noticed an impact. Bankers note that their customers, including small businesses as well as consumers, have turned more conservative in their borrowing. But the owner of a St. Louis clothing store finds a silver lining in that cloud. Says she: "Rising rates help me because people don't buy the big things like houses and cars, leaving them with cash in their pockets to spend on things like clothes." Health care reform is a worry for business leaders, but not as much as one might expect. Only 8% say the possibility of a mandate for employer-paid coverage has actually affected their hiring plans. But the prospect makes some small-business executives very anxious, one going so far as to say it would put her out of business. Several comment that they are hiring only part-time people to avoid being committed to providing benefits. But others are sanguine -- mostly those who already provide full coverage for their employees. Fears of never-ending price wars appear to be fading. In their stead come fears of inflation. Ninety percent of the survey respondents expect prices of the goods they purchase to increase more in the year ahead than they did in the past year, and 80% expect to raise their own prices more. Prices have already started to move, according to a Cleveland banker who says, "I'm hearing more instances of price increases sticking." And some are buying now to avoid paying a higher tab down the road. A Canoga Park, California, plumbing distributor heard that the large trucks he needs could cost as much as $4,000 to $5,000 more next year. He says he had planned to hold off but instead is adding to his fleet now. The droopy dollar compounds inflation worries. Nearly 40% say its weakness has affected them. A Bedford, Ohio, auto dealer who sells Nissans notes that while most of the cars are built in the U.S. now, "replacement parts have become more expensive." And according to the purchaser for a Los Angeles appliance store, more people are requesting American-made products because they cost less. On the bright side, plenty of things that used to stir up anxiety among business folks don't trouble them anymore. For example, last summer, tax increases were worrying more survey respondents than any other issue. But that's a fret no longer. "Tax increases didn't have a severe negative effect," observes the CEO of a St. Louis bank. Other than health care, the fear that onerous new regulations would be foisted on business has also waned. And the federal deficit has dropped off the worry list. The upbeat mood of the survey isn't explained by any particular event or issue that executives talk about. Some mention strong employment as a source of optimism, while others point to consumer confidence or the expanding international recovery. But 84%, the highest in 20 years, report that their own sales are good or very good right now. That's a lot more than a cup half full of good cheer.

BOX: OVERVIEW

-- The executives' chief worry: higher interest rates. -- Health care reform hasn't altered hiring plans. -- No inventory glut will bury the expansion.

CHART: NOT AVAILABLE CREDIT: FORTUNE CHART CAPTION: THE BUSINESS MOOD INVENTORY/SALES RATIO