The economy will "muddle through" the rest of this year and 1986 without a recession, despite a sharp slowdown in consumer spending, according to the fall economic forecast of the Business Council.

The average forecast by 18 chief economists from major U.S. corporations is for economic growth at an annual rate of 2.1 percent at the end of this year, rising to 2.5 percent in the fourth quarter of 1986.

The economy's weak performance will keep unemployment just above the 7 percent level through the end of next year, the economists predicted.

"We don't expect a recession, but certainly not strong growth," said James D. Robinson III, chairman of American Express Co., who presented the forecast prior to the meeting of the Business Council, whose members are the chief executives of 100 major U.S. corporations and financial institutions.

The continuing drag of an overvalued dollar is one reason for the slowdown, Robinson said. The council's economic consultants estimate that the dollar will drop another 5 percent in value compared with other major currencies by the end of this year, on top of the 15 percent reduction that has already occurred since February. The economists see the dollar dropping another 5 to 15 percent next year, but don't expect the decline to offer much relief to the struggling U.S. manufacturing sector's competitive position on trade.

"I think the dollar really is killing us, most of us," said Edmund T. Pratt Jr., chairman of Pfizer Inc., a major drug manufacturer.

However, the dollar's decline is expected to lift corporate before-tax profits from this year's depressed levels, as the competitive pressures of low-priced imports ease somewhat. The council economists predicted a 1.4 percent growth in profits this quarter over the fourth quarter of 1984, and a 7.3 percent increase in fourth quarter next year.

The dollar's uneven impact on Business Council companies helped account for a wide spread in growth forecasts by the 18 economists. The rosiest outlook was for a 5 percent growth rate next year, while three of the economists anticipate one or more quarters of negative growth in 1986. Robinson didn't say which economists held those views.

The expected slackening in consumer spending is the major new factor responsible for the economic slowdown the economists anticipate.

The Business Council outlook shows the annual growth in consumption at a strong 4.1 percent in the fourth quarter of this year, dropping to 2.5 percent in the fourth quarter of 1986. The individual economists' projections were spread-eagled in this area too, with an optimistic 5.3 percent growth rate for the end of 1986 from one consultant contrasted with another economist's prediction of a 0.3 percent decline in that quarter.

The decline in spending is the result of an overload of debt that has finally begun to weigh consumers down, Council members said.

"Consumer spending, which has been a very substantial prop to the economy, the past several years, has seen a very measured and significant slowdown really beginning in the March-April period of this year," said Philip M. Hawley, chairman of Carter Hawley Hale Stores Inc.

Consumer debt appears to be at a record level, although comparisons with past decades are not exact because of the increase in two-earner families. "We've seen a five months' slowing of spending generally attributable to the high debt loads consumers are carrying. . . . And their ability to continue to add to that must be described as limited," Hawley said.

The economy won't be getting much lift from business investment, either, the council forecast predicted. Business spending on plant and equipment should slow from an annual rate of 4.4 percent this quarter to a 2.8 percent growth rate in the fourth quarter of 1986.

Other average forecasts by the economists are for an increase in inflation of 4.7 percent in the fourth quarter of 1986 compared with a 3.8 percent figure in the current quarter; auto sales of 10.6 million cars next year, down slightly from this year's near-record 10.9 million, and a slight decline in housing starts, from 1.79 million this year to 1.78 million next year.