Still some clouds on the horizon

Despite some optimism regarding 2008’s economic prospects, economists admit there are still a number of black clouds darkening the horizon. First and foremost is crude oil near $100 per barrel, which has potential inflationary implications throughout the entire economy.

“It is not just that price, but at what price do we see a gallon of milk go up because of gas?” Goldstein says. “How much more does it cost to get the milk from the dairy farm to the grocery store? And it’s not just milk. It’s stretching household budgets — there’s a chance it might tip the consumer.”

The weaker dollar itself is also inflationary because it increases the price of imported goods. While the lower greenback supports the export picture, “the second shoe on the dollar is yet to drop,” Swonk says, pointing to “the full impact of the oil price increases and the full effects of the inflationary consequences.”

Another black cloud hovering on the horizon is continuing fallout from the sub-prime mortgage mess, which has proven to be more far-reaching on Wall Street than most people initially dared to imagine.

“There is uncertainty as to where the dust will settle with the sub-prime debacle,” Swonk says. “The process will take another three to six months to get some stability and will leave the dollar vulnerable.”