U.S. economy
Homeownership rates are headed even higher. Already, a record 69% of households own their own home. By 2012 or so, it’ll hit 72%.
That’s more solid underpinning for economic growth down the road. More ownership not only fuels demand for single-family homes, mortgages, and realtors, it also provides a wider base for future refinancing.
Most of the gain will come in the West ... the Mountain states and Pacific Coast ... where ownership rates, at about 64%, lag behind. Plenty of undeveloped land and a fast-growing immigrant population will help. Typically, immigrants buy homes about 10 years after arrival.

Congress won’t tighten up too much on Fannie Mae and Freddie Mac. Critics want the giant government-sponsored home mortgage enterprises to be reined in more tightly following news of accounting discrepancies. The two companies each buys and holds billions of dollars in mortgage loans.
Concerns about raising interest rates and crimping housing demand will make lawmakers think twice about imposing tough new restrictions: Limiting the volume of mortgages or raising capital reserve requirements.
But Fannie and Freddie will need to bare their books more often.

Global business
A Chinese electronics blitz is coming. PCs, TVs, DVD players, game stations, digital cameras, cell phones, and more from China will hit the U.S. within a year. Chinese manufacturers, including Norcent, X2, Syntax Groups, Konka, Ningbo Bird, and TCL, have been making components for U.S. vendors for years. Now they want to market completed products.
Prices will be tough to beat ... up to 25% less than comparables.
Initial supplies won’t be enough to go around. Retailers will race to lock in the cheap goods, contracting for factories’ entire production.

Is the U.S. offshoring its innovation? More American entrepreneurs are finding it easier to launch new technology and products in China and India than in the U.S. Rapid growth of consumer and business demand for technology makes companies there more willing to take chances. In the U.S. and other more-mature markets, buyers of business technology are trying to do more with less, so they tend to want to minimize risks.

The world
Many U.S. equipment makers are eyeing South America for growth.
Brazil will be a big buyer of transportation gear, which it needs to ease railroad, port, and highway tie-ups that limit its farm exports. Paying to bolster its infrastructure shouldn’t be a problem. Brazil’s GDP is on track to rise 3.5% this year after a blistering 5.2% pace in 2004.
And Chile is investing heavily in a number of industries ... paper, construction, energy, and agribusiness. It’s looking to foreign suppliers for a slew of building, power, and mining equipment. Chile’s GDP growth, fueled by booming copper exports, will likely be about 5.8% this year.

Russia won’t open its markets much wider this year or next as it continues to ponder whether to join the World Trade Organization.
The Kremlin is antsy about opening up protected industries such as energy, autos, banking, and metals to foreign competitors. It’ll take Russia until 2007 at the earliest to get ready to open up.
Meanwhile, oil exports will continue to fuel Russia’s economy in 2005, propelling GDP growth of 6%, a point below last year’s gain. But falling oil production will begin to hurt oil revenues next year because of Russia’s seizure and breakup of Yukos, its top oil producer.

New U.S. arms sales to Taiwan are likely following China’s move to bolster its claimed right to invade Taiwan if the island secedes. Taiwan hasn’t wanted to spend the money before. Now it’s reevaluating, boosting chances that it will buy missiles and reconnaissance aircraft.

© 2005 The Kiplinger Washington Editors, Inc.