01-30-06 Special Called City Council Retreat Meeting of La Porte City Council

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The Kiplinger'Letter • FORECASTS FOR MANAGEMENT DECISIONMAKING 1729 H St. NW, Washington, DC 20006-3938 • KiplingerForecasts.com • Vol. 82, l441 48 2005 Dear Client: Washington, Dec. 2, 2005 As. the economy holds firm next year... 1 ' ' q1�1■Z� t��N!!•7l•7 for a third straight year of over 3% growth... raise their prices. GDP NEW FORECAST '� '06 ®More companies will up 3.7% this year, 3.3% in ' • But for many, profits won't go up much. .................................................................... Interest rates Their costs for wages, insurance premiums, ♦ Prime rising to 7.25% by end of shipping -fees, postal rates, office rents, '05, reaching 8% in'06 raw materials and more will rise even faster, """"•" ........i.I.n.....••"'"...""""••"•'."•.""""' Infiatton threatening income despite increased sales. + Gaining:4%in'05,3%in'06 ....................................................................... Retailers face the biggest challenges T NEW FORECAST 2mpion new 2 million new jobs in'05,'06 on the pricing front. Rapid growth in Web sales ......••••••••••••••••••••..••............"""""" Trade deficit and aggressive expansion by big discount chains ♦ Rising to $739 billion in '06, will intensify competition. And as consumers 5.9%of GDP seek to reduce debt, they'll bargain -hunt more. """•""Housin"........."•g "'•"•""""•""""""""•""""• Restaurants are headed for a squeeze, �► Sales rising to 8.3 million in'05, with high fuel costs now starting to show up slighVeasing to 7.8 million in'06 in prices they pay . for a wide range of foods.. ............................................................ Retail sales Carmakers are resuming sales incentives Growth steady at 4% In '06 and even raising them to help maintain demand. ....................................................................... Auto sales ,► In the face of eroding profits, U.S. carmakers • Falling to 16.8 million in'06 had hoped to phase out incentives by next -year. :or�a Chemical firms are in a tight spot, despite scant growth in production capacity that will work in their -favor next year. Soaring costs of natural gas, a key feedstock, are a headache. Producers of specialty chemicals such as propylene face the added burden of big cost jumps in.some of the compounds they rely on more than others. Makers of building materials will be a bit better off as demand generated by rebuilding in hurricane -stricken areas buoys price hikes. But costly components... plastics, lumber, etc ... will trim profit gains. Industrial equipment vendors will have more leverage o prices as business spending gains 8%, spurred in part by post' -hurricane cleanup. •STS COOLPROFITS 5%—Business-6os ,• • (Producer Price Indeed • • • • 4% —+r— �• 3% Consumer Price 2% Index t% (annual rise, Dec. to Dec.) 0% 2003 2004 2005 2006 . Sources Commerce Dept. Ki ! ger High tech is mixed, with more downward pressure on computer hardware prices likely. But makers of networking equipment will be in better shape. Risine demand will help keep hotels flush." They'll stay ahead of labor and upkeep expenses. Customers are lining up at freight firms, giving them the leeway to add fuel surcharges. The bottom line: Slower profit gains... 7% on average for all firms, vs. 14% this year. But this will help -limit consumer inflation and pave the way for the Federal Reserve to end its interest rate hikes next spring. M*WWLd@r0ssw15z8-713Mb;eA5s ea•edarbr$117&wYW,,S12IMNO earaPMuasrws Subsaip6o bWid eoaa44-01Zorsunwvices@*&vroom U) by The 1q*WM Edbrs.17S H M. NW, WasM"m DC 20 *3M E to1121 inknm6m Tel 2D2-B744e. Fn X2-77M7C PPedodoals paid at YYesN�M1 DC — or W& sfft � oom Swd address dmr g b fie A*WLeGx PA. Box 3288. Hadar, IA 51Sn Eouq