Kiplinger Connection
The Economy • Energy Prices • Small Business

The Economy: Congress may give builders a tax break.
Energy Prices: Gas will gain another 25 cents before falling off.
Small Business: A Web site with leads for overseas projects.

The Economy
The Federal Reserve’s focus from now on: Inflation, not growth.
That means no additional rate cuts for at least several months. In fact, the next rate change is likely to be upward, sometime in 2009.
Consumer prices are up broadly ... 4% higher than a year ago ... with energy price hikes seeping into other sectors and food prices rising.

Congress wants to help stressed homeowners but can’t agree on how. A $25-billion tax break aimed at builders, but which would also give aid to airlines, carmakers, and others losing money, is one sticking point.
Still, lawmakers will likely agree to at least some measures:
A voluntary program to encourage lenders to swallow some losses by allowing owners to refinance mortgages at current market values.
Grants of about $15 billion to help states provide loans and aid for buying and rehabbing foreclosed homes and spur more rental housing.
And small, zero interest loans for first-time buyers in 2008-2009.

Energy Prices
Look for gasoline prices to peak shy of the $4 a gallon level this summer. The average for regular unleaded will top out at a dime or so under $4 ... about 25¢ above current prices. One reason: Demand is declining, with consumers opting to drive less. Another:
Oil is more likely to retreat from recent highs than exceed them, as the dollar firms with the end of Fed rate cuts. In Miami, NYC, Chicago, and other high cost areas, drivers will pay $4. Some already do in Calif.
Diesel prices will remain above those for gasoline, pushed higher by strong global demand plus clean air regs that raise production costs. Truckers and others will pay $4.50 a gallon by July, and at least some of the hike will trickle down to consumers in the cost of other products.

Credit ethanol for keeping gas prices from going even higher. The corn-based fuel is taking a public beating...blamed for increases in food prices and suspected of doing more environmental harm than good.
It accounts for about 6% of sales at the pump ... roughly the same as oil imports from Nigeria, the U.S.’ fifth-largest foreign supplier. Imagine what would happen to prices if that oil supply were cut off.

Small Business
Selling overseas isn’t just for the big boys. The weak dollar ... boosting exports and growing demand for an increasing variety of products ... makes this an ideal time for small firms to join the party.
The Commerce Dept. is eager to play matchmaker, helping to find and screen potential overseas partners and customers. Custom counseling is also available. For architecture leads, visit www.export.gov/industry/architecture/.
Exports will make up about 12% of U.S. GDP this year ... on a par with last year ... one of the hottest parts of an otherwise soft economy.