Free today - business costs outlook for 2019

Yours free - business costs for 2019, compliments of The Kiplinger Letter. This Special Report was originally published August 17, 2018, for subscribers to our premium [Kiplinger Letter]( service. Dear Client, It's time to prepare your business budget for next year. To help the process, we've pulled together fresh forecasts on a range of expenses... airfare, electricity, energy, health care, insurance, legal expenses, technology and telecom, and more. [The Kiplinger Letter]( [Click for a free sample issue!]( Look for economic expansion to cool slightly, but GDP growth will still be solid in 2019, rising 2.8%, compared with 2018's 2.9% gain, largely because import tariffs will raise costs for some businesses while other countries' tariffs will hurt exports. Consumer spending on services will be the major force behind growth. For goods, note that there will be a pullback on autos, though housing is set to pick up next year. Uncle Sam's deficit spending is also a significant factor in goosing the economy. Inflation will hold steady in 2019. Measuring Dec. 2019 over Dec. 2018, the Consumer Price Index will rise 2.5%, equaling 2018's pace. Food and other goods will increase at less than that rate, while costs for housing and services will grow faster. Meanwhile, core inflation...prices excluding food and energy... will also increase 2.5%. The cost of borrowing will edge up as the Federal Reserve hikes interest rates two more times in the fall of 2018 and then three times in 2019. By the end of 2019, the prime lending rate will hit 6.25%. Yields on 10-year Treasury bonds will hit 3.6%, after ending this year at 3.2%. And 30-year fixed mortgage rates figure to top 5%. Business investment will be strong... a likely 8% increase, after a 7% gain this year. A growing economy, a healthy manufacturing sector and corporate tax cuts will contribute to robust business spending. Firms are keen to add more automation to their production lines to lift productivity. [click for your free issue]( But headwinds remain from U.S. tariffs on steel, aluminum and other foreign goods, likely halting a more vigorous ramp-up. Businesses such as automakers and breweries will feel the pinch of pricier metals. Corporate profits will jump... up 8%, matching the rise expected this year. Credit the tax cuts and strong economy. Companies in industries across the board, from energy and health care to tech and financial services, will reap higher profits. Another good sign: More businesses are starting to make modest price hikes stick. Export-heavy firms, though, face risk from the trade war between the U.S. and China: Sales could be dinged as their products become increasingly costly to foreign buyers. Expect most energy costs to be somewhat higher in 2019 relative to this year. Crude oil will continue its climb, with benchmark U.S. crude averaging $70 per barrel next year, compared with roughly $65 in 2018. But oil markets are certain to remain jumpy, with plenty of price swings above and below the yearly average price. Gasoline: Averaging $2.90 to $3 per gallon nationwide for regular unleaded, versus an average of $2.73 so far this year. Prices will be higher on the West Coast and in the Northeast, and lower in the South Central U.S... the usual cost differences. Look for diesel to run $3.30 to $3.40, on average, compared with $3.13 so far this year. [click for your free issue]( Propane users: Budget 5% to 10% more than in 2018, unless the coming winter is mild. Natural gas prices should remain fairly stable, up no more than 5% in 2019, on average, from this year's prices, and possibly flat if the winter ends up being warm. Electricity figures to trend slightly higher... up 1% to 2% for most customers. Average pay raises... 3.3%, up from 3% in 2018, as tight labor markets spark wage hikes for high-skilled folks as well as low-paid food and service workers. Overall benefit compensation is set to increase 3.3%, matching wage gains in 2019, including the cost of 401(k) contributions, paid vacations and sick leave. Payroll taxes... rising, as the wage base goes from $128,400 to $132,300. For firms that pay pension premiums to Uncle Sam... a hefty 2019 increase: 8% for plans paying flat rates, rising to $80 from $74 per plan participant in 2018. And a jump in variable-rate premiums for underfunded plans, rising to $42 from $38 per $1,000 of unfunded vested benefits (subject to a $523-per-participant ceiling). The cost of employer-sponsored health care will increase about 5% in 2019. Shifting costs or cutting benefits is mostly over. Competitive health benefits are a must to attract and retain good workers in this labor market. Managing high-cost patients will be a big focus. And more patient-centered features, such as advocacy services, by which nurses help patients find the right doctor, compare costs and resolve claims. [click for your free issue]( Expect overall pharmaceutical price hikes to be moderate...rising 8% in 2019, versus 10% this year. Prices for generic medications, which are 35% of the total cost, will be flat. Specialty drugs will continue to make up most of the prescription hikes. Shipping costs will ease in 2019 after staying high for the rest of this year. Spot trucking rates... down 5% to 10%. Contract rates lag behind and will be up 10%. Intermodal rail... down 10%. Ocean shipping from China... down 25%, following highs seen this year as companies rush to beat tariffs. Other routes will stay as-is. Airfares on domestic routes will rise modestly... up 1.8%, on average, in 2019. Competition among low-cost carriers on overseas flights will keep those fares steady. Car rental rates will barely inch up... less than 1%, even with ongoing pressure to raise prices to cover higher costs. Three players make up about 90% of the market. Hotels... up 2.4%, versus 2.7% this year. Some deals will be possible if employers have a long-term relationship with the property and are flexible on dates. Insurance rate hikes will be mild, for the most part. Expect a 5% to 10% rise for commercial property insurance. Directors and officers insurance... 5% rate hikes for public companies, while private company and nonprofit rates will decrease 5%. Casualty insurance... flat or up a tad. Umbrella and excess liability... falling about 10%. Overall, cyberinsurance premiums will fall as demand soars and coverage expands, though costs vary depending on the cybersecurity controls companies have in place. [click for your free issue]( Accounting expenses... up 5% to 10%. The cost increase reflects more focus on corporate accountability, which has fueled demand for accountants for public firms. Legal costs... up 5% or so, though many legal fees can be negotiated lower. Tech and telecom costs continue to fall. Smartphone prices will drop 9%, on average, with plenty of low-cost models. But high-end phones will fetch a premium and inch up in price. Tablet and PC prices will drop around 5% to 10%, on average. Printers... 10% declines. Prices continue to sink for wired bandwidth... declines of 10% or more in some areas, though costs vary widely based on location. Mobile data prices won't decline as much as in recent years. Still, figure on price decreases of 5% or so. Digital advertising costs will be volatile. Most ads on sites such as Google and Facebook are determined by a competitive bidding process. Rates will also vary for cost per view and cost per click. In general, though, digital ad rates are declining. One thing that won't change in 2019... you can count on the weekly Kiplinger Letter for reliable economic forecasts and trustworthy advice and guidance to make more profitable decisions for your business and investments all year long. Click any of the links in this e-mail to [download a free issue]( - no information is required from you. Then take advantage of an exclusive offer to get 12 free monthly bonuses and save 63% when you subscribe. Thank you for your continued readership. We look forward to serving your business and investing information needs in the months and years ahead. Yours very truly, [Knight Kiplinger] For The Kiplinger Washington Editors P.S. [Get your free issue now](. No information is required from you. The Kiplinger Washington Editors, Inc. 1100 13th Street, N.W., Suite 750 Washington, D.C. 20005 You received this e-mail because you are on our Business Forecasting list. 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