Forecast 2009: Your spending
The prediction: Consumer prices will stop rising so fast - and some will fall.
(Money Magazine) -- Are you ready for some relief? Here it is: The prices for most stuff you buy won't rise as rapidly in 2009 as they did this year.
Inflation roared back in 2008 - as of September, the consumer price index had risen by 4.5% over the previous 12 months.
But the rate of increase has been leveling off lately, and the slowing economy should help keep inflation in check in 2009.
In the third quarter of 2008, consumer spending was expected to fall for the first time since 1991 - an inducement to retailers to trim prices in 2009. Most economists expect consumer prices to rise by less than 3% next year.
We're already seeing those forces play out in the price of oil. Concern about a weakening global economy has pushed prices down from a record high of $147 a barrel in mid-July to about $65 a barrel today. Goldman Sachs forecasts that oil will gradually climb to $107 a barrel by the end of 2009.
Still, the Energy Information Administration predicts that the price of gas will likely remain even with the 2008 average ($3.56 a gallon) and that the price of home heating oil will likely go up by only a few cents (to $3.80 a gallon).
One area where you won't find much relief is food prices, which surged about 6% in 2008. Economists forecast a more moderate 4% to 5% rise next year.
That's because while transportation costs and world demand will likely ease, low levels of farm inventories, including wheat and corn, will keep the cost of feed high.
- The price of oil
As we mentioned, trouble in the Middle East could send it skyrocketing once again - taking the price of gasoline and home heating oil with it.
When times are tough, consumers gain bargaining power. More than 70% of Americans have managed to finagle a better deal on a purchase in recent months, according to America's Research Group - a 14-percentage-point jump from a year ago.
So try to negotiate better rates on your credit card and lower prices on everything from your cell phone to your health-club membership.
- Track your spending
If you need a better idea of where your money is going - and who doesn't these days? - try a free budgeting site like Mint.com, which makes it easy to build and follow a spending plan.
- Cut your home energy bills
Make your home more energy-efficient with better-quality windows, doors, insulation and siding. For a list of home improvement tax credits in 2009, go to energystar.gov.