Kiplinger Forecasts (requires subscription) has just issued its Top Ten Trends for 2005. These trends are applicable to the U.S. economy as a whole, and not necessarily just small business:
1. Higher energy prices –
- Kiplinger says look for higher gasoline prices by Memorial Day, with prices averaging US$2.15 per gallon.
2. Modest (3.5%) economic growth – Economic growth will be slower than in 2004, but hiring will accelerate.
3. A worsening situation in Iraq – The attacks will continue and get worse.
4. A bottom for the dollar by spring – The weak U.S. dollar will finally hit bottom in the spring and begin to edge upward.
5. Higher prices, but lower inflation – Inflation will be 2½%, lower than 2004. Prices will rise due to the weak dollar increasing the price of imports.
6. Better stock returns than 2004 – Expect 12%-15% stock returns. Likely strong performers include: Energy, defense and biotechnology plus manufacturers of medical and electrical equipment.
7. An even more contentious U.S. political arena – Due to contention, we are not likely to see tax reform or Social Security reform in 2005. But we may get some liability lawsuit limits and bankruptcy law reform.
8. Employer health costs rising about 10% – Health insurance premiums will rise 10%, which sounds like a lot but is not as bad as some recent years. Health Savings Accounts, high-deductible plans, and consumer-driven plans that emphasize judicous use of health care, will be the main techniques used to control costs.
9. Burgeoning foreign investment BY China – Chinese companies will be snapping up foreign companies. Top targets include electronics, IT, telecom, and raw materials for China’s builders and manufacturers.
10. Intense competition for telephone and Internet services – Everything in this category will be getting cheaper. We’ll see many new services and new technologies rolled out.
The issue gripping small business the most is number 8, health insurance costs. The U.S. system of employers providing health insurance benefits for their employees, places small businesses at a disadvantage.