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Look for growth of gross domestic product to slow this year to around 1% as housing and credit woes and high energy prices weigh on consumers and businesses. The first quarter likely will show GDP in minus territory on the heels of a 0.6% increase in the fourth quarter of 2007. More strength will come during the second half as effects of the Federal Reserve's rate cuts and the fiscal stimulus package are felt. They will help offset housing, which won't stabilize until late 2008 at best. The outlook for the credit markets remains murky, raising questions about whether companies will be able to raise the cash they need for day-to-day transactions and longer-term investments. Barring a full-on credit freeze, or a huge spike in oil prices, business spending should be a shade under 2007's 4.8% advance. Meanwhile, growth in consumer spending is likely to ease to 2% from 2.9% in 2007.

It's likely that the Fed will deliver still more rate cuts. Officials remain concerned about the weak economy and note that "tight credit conditions and the deepening housing contraction" will weigh down growth "over the next few quarters." At the same time, they're concerned about inflation which is being driven by the price of oil and other commodities. With the benchmark fed funds rate down to 2%, they'll wait to see if fiscal and monetary stimulus revives growth and whether commodity prices retreat from the stratosphere. As for long-term rates, we see the benchmark 10-year Treasury moving up a bit to 4% by the end of this year. The 30-year fixed-rate mortgage will stay in the neighborhood of about 6%, where it stands now.

The weak economy that's spread from housing and manufacturing will hurt overall job growth this year.The economy will struggle to generate net new jobs (total jobs added minus the total eliminated) totaling 100,000 at best. If the tax rebate checks stimulate spending during the second half of this year, and if credit market conditions improve. Job growth totaled 1.13 million in 2007. Job totals will shrink for the next several months as businesses increasingly say they're wary about forecasts of growth later this year.

Price surges in food and energy slowed for a bit in Feb. but jumped in March. And they're likely to remain elevated for a few months at least. A weak economy should temper the price increases a bit so that the Consumer Price Index will rise about 3% this year. The CPI posted a 4.1% gain from December 2006 to December 2007. Meanwhile, the core CPI, which excludes food and energy prices is likely to increase around 2% this year following an increase last year or 2.4%.

There are signs that buyers are nibbling at buying homes after a long slowdown. But getting a mortgage remains harder than a couple years ago. As a result, the near-total freeze on mortgages for less creditworthy borrowers plus rising delinquencies will be a drag on housing demand this year that will fuel further declines in both sales and home building. The stimulus plan signed by President Bush will provide some help for high-priced markets on both coasts by raising the ceiling on jumbo loans from $417,000 to about $725,000 for mortgages held or guaranteed by Fannie Mae and Freddie Mac. Meanwhile, the housing slump will continue through this year with the average house price declining about 5%, with a drop of 10% to 15% in Las Vegas, parts of California, some suburbs of Washington D.C. and other places which posted huge price gains in recent years. Sales of new and existing homes combined will fall about 10% in 2008

Oil supplies are fundamentally tight, and the multitude of supply risks around the world will prevent prices form going into a tailspin. But slowing economic growth or declines in most industrialized nations will likely limit growth in global demand for crude to around 1% in 2008, a tad less than last year, while supplies will expand at slightly more than 1%. We see oil averaging about $94 a barrel in 2008, up nearly $22 from the average of 2007. But prices will see-saw. Crude oil will hover around $100 a barrel during the second quarter of this year, with spurts to $115 possible. As consumers and businesses cut back on motoring in response to deteriorating economic performance, oil prices should slide to about $90 a barrel by early summer, before rising mildly later in the second half.

Gasoline should average around $3.25 per gallon in 2008, up about 45˘ from last year. The surge in gas pump prices that began in February should ease off along with oil prices. Nationally, gasoline prices should top out at $3.50 per gallon, or so, barring major refinery mishaps. For diesel, expect to pay an average $3.65 per gallon, nearly 80˘ higher than last year. Heating oil will increase about 75˘ to $3.45 per gallon, while natural gas will average around $9.25 per million British thermal units, up from $6.40. Propane prices should average $2.55 a gallon or so, up 40c.

The trade deficit will shrink to roughly $613 billion and 4.3% of U.S. gross domestic product (GDP) in 2008. It will mark the second straight year of declines -- last year, the deficit totaled $708.5 billion and 5.1% of GDP, down from record highs of $758.5 billion and 5.7% of GDP in 2006. Further, 2008 will see the smallest trade gap relative to GDP since 2002. Export growth will remain robust at 8%, down from a scorching 12.6% in 2007. Import growth will slow to a mere 0.5% from 6% last year. Global GDP is likely to grow 3.8%, slowing from 2007's 4.7% but sustaining foreign demand for U.S. goods. The weak dollar will continue to help exporters by making U.S. goods more affordable and more competitive on world markets, even though the greenback is likely to hit bottom sometime in the second half. That's because price changes tend to lag those in exchange rates by roughly eighteen months.

Retail sales are slowing to a 2% increase in 2008 after a 4% gain in 2007. Wal-Mart, the nation's largest retailer, will slog through another modest year with a sales increase of around 2%. Target's sales will climb around 4%. Middle-market department stores will ring up 2% to 3% higher sales. Luxury merchants are poised for a 6% or so sales boost, although a protracted slump in the stock market will prompt some high-incomers to curtail their discretionary purchases.

Sales via the Web will continue their torrid increases, climbing 15% in 2008 to around $300 billion and capturing 10% of total retail sales, up from about 9% in 2007. Consumers are increasingly comfortable with buying products online, while many retailers are upgrading their Web sites to attract more buyers.