Tech
Businesses will continue to buy PCs, but at a more moderate pace later this year and next. That will drop growth of U.S. sales of computers into single digits after two years of double-digit gains.
Look for a 9% sales gain in the U.S. this year, a single point below last year’s rise. Sales growth in 2006 will be a more modest 5%-6%. By then, most companies looking to replace equipment will have done so.

Double-digit growth will return by late 2007, when an all-new version of Microsoft Windows makes its debut, sparking a new wave of buying. If the operating system, code-named Longhorn, works as planned, it will lessen vulnerability to spam, viruses, worms, and other nuisances.
Advances in computers promise to be dramatic. Longhorn and other technologies in the works will allow PCs to run much more efficiently. By the end of the decade, technology advances will bring much of the enormous processing power of today’s high-performance supercomputers to ordinary office desktops.

Cell phone and Web use during commercial flights will be OK’d by the Federal Communications Commission in a year or so. After testing, the agency is confident that their use doesn’t harm navigation systems and air-to-ground communications between pilots and control towers.
Phone connections will be fast with new satellite technology being developed by Boeing. Low-power switches installed in airliners will transfer calls via satellite to and from airborne cell phone users. The switch is designed to work with all cell phones in use today.
Airlines welcome the move. They’ll cash in by taking a share of the premium prices that wireless carriers will charge for the service.

Trade
Good news for exporters to Mexico: Another strong year is on tap, with the Mexican economy expanding by 4%, the same as in 2004. Most in demand: Auto parts, electronics, IT, machinery, and plastics.
Longer term, however, Mexico’s economy faces serious risks. The country’s tax, education, and energy sectors all need improving. But, with growth humming along now, there’s little impetus for change. The longer reforms are put off, the gloomier the outlook for the economy.
A good year for exports to Canada, too: Canadian GDP growth for 2005 will reach 3%, a slight improvement over last year’s 2.7% pace. That will underpin demand for IT, software, building supplies, and more.

The economy
Inflation will remain well behaved this year, even as many firms push ahead with price increases for their goods and services. The hikes likely will be modest, not enough to spark higher inflation. And oil prices will hold roughly steady, unlike last year’s 35% jump.
Look for the Consumer Price Index to gain only about 2.5%, down from 3.3% in 2004. Excluding food and energy, it’ll rise about 2%.

Odds are the Federal Reserve will adopt an inflation target after Chair Alan Greenspan’s term on the Fed’s board of governors expires. Greenspan has long rejected that approach to keeping inflation in check, but possible successor Ben Bernanke and other Fed policymakers favor it.
A target of, say, 2% or so would eliminate guesswork by markets about whether the Fed will raise or lower short-term interest rates. It would also ease fears that a post-Greenspan Fed will be more lax on taming inflation. A target would compel the Fed to stay the course.
But it wouldn’t be set in stone. It would be simply a guideline, subject to change, and not written into law as in some countries.

© 2005 The Kiplinger Washington Editors, Inc.