The walls of the auditorium where 260 Shenandoah Valley business and industrial leaders had gathered for an annual analysis of the economy were painted black.

So was the message they were given.

Allen Sinai of Data Resources Inc. looked into his computer and saw a "70 to 80 percent chance of bad economic weather for the next 12 months." Continued recession, high interest rates and rising unemployment were the outlook.

But this is "the price of fighting inflation," he continued.

A "real attempt is being made to squeeze out inflation," said the nationally known economic analyst. But the fight is not going to be easy, and even the most ardent supporters of the "glowing, candlelight world of Reaganomics . . . are scaling down expectations," Sinai said.

He returned to his computer and found only a 15 percent chance of their optimistic economic forecasts coming true.

Sinai hedged when asked the odds his computer placed on a "real wipeout."

"We haven't run that," he said. Besides, economists are reluctant to talk of "wipeouts" and depressions for fear the forecasts may become self-fulfilling.

Finally, he conceded that he believes the "wipeout" chances are 15 percent to 20 percent--a more likely probability than Reaganomics forecasts being fulfilled.

"If you have a pessimistic feeling in your gut, as I do, you may want to be a little more cautious," Sinai told the group.

Although he has a "very negative outlook" on the economy for the coming year, Sinai said he sees a brighter outlook for 1983.

The squeeze on inflation is working, he continued. Retail sales, which have been sustaining the economy, finally have sagged and there is a "real incentive to save" because interest rates are higher than the inflation rate.

The next major crack will come during wage negotiations next year, Sinai predicted. There will be "real pressure" on unions to hold wage increases below the inflation rate in order to "preserve jobs," Sinai said.

The financial markets are "waiting for something like that" to signal a break in the uptrend of inflation, he continued.

Once the financial markets receive the signal, interest rates will begin dropping, he predicted. As interest rates come down, the economy will become more stable and business will become more active.

The supply-side economics pushed by the Reagan administration is nothing new, James Madison University President Ronald Carrier, an economist, told the group.

The university was a co-host to the economic seminar last week.

Supply-side economics was the "classical" theory during the Great Depression of the 1930s, Carrier said. Policy then shifted to the Keynesian theory, which emphasized government stimulated demand.

The demand-economy school has been in trouble since the 1960s, and it may be time for a return to the classical theory, he said.

Three Shenandoah Valley businessmen told the seminar that the area's generally stable economy is feeling the economic squeeze.

In 1980, farmers had their worst year since the Great Depression, said William D. Wampler, and 1981 promises to be worse yet. Wampler is a turkey and cattle grower and director of the Federal Farm Credit Board.

The entire meat industry--poultry, beef and hogs--has suffered from low prices and high production costs, Wampler said. But he predicted a brighter outlook. One reason is the prospect of cheaper feed this year because of a large Midwest corn crop.

Dairying has been profitable the past few years, but the cost squeeze is catching up with the industry, Wampler continued. Apples--a major Shenandoah Valley product--are strong this year, he added.

One element farmers traditionally have counted on--the rising value of their land--sagged this past year, Wampler noted.

Two other speakers said that the Shenandoah Valley's housing and construction industry normally has been cushioned from booms and busts. But the spring has gone out of the cushion this time.

J. Burl Galloway, who operates a carpet fiber producing plant at Waynesboro, said he is running only at half capacity.

And Wallace Hatcher, who operates a major Shenandoah Valley construction firm, said that although builders are willing to trim costs to get contracts, few people are interested because of high interest rates.

Despite the current sag, Galloway said he is "bullish" on the future. "A huge backlog is building," he said. "The people who have the courage to produce today are going to have the products to sell" once demand surges, Galloway said.

Eighth District Rep. Stanford Parris also was scheduled to speak at the seminar but canceled because of House consideration of a banking measure. An aide told the group that Parris, a Republican, is convinced the Reagan economic program will work.

The seminar has been sponsored jointly for six years by James Madison University, Rockingham National Bank and WVPT, the local public television station.