Moderate growth in the U.S. and a slowdown in most overseas economies spell lower inflation this year. Look for the Consumer Price Index to increase by only about 2% from December 2011 to December 2012, following a rise of 3% in the previous 12 months -- the largest annual increase since 2007.

But volatility in energy prices will keep the ride bumpy. As recently as last September, energy prices were up nearly 20% over the previous 12 months, but then subsided, finishing the year up just 6.6%, measured from December 2010 to December 2011. Upward pressure will also come from the rising costs of medical services and drugs plus education. They'll be partially offset, however, by decelerating increases in the prices of other products, such as apparel and new cars. Prices for food at home and in restaurants, which rose 4.7% last year, are also likely to climb at a slightly lower rate this year.

We expect the core CPI, which excludes food and energy, to match last year's rise of 2.2%. The key driver will be rents, which remain on the upswing. With unemployment high and job growth just so-so, there's been a falloff in homeownership in favor of renting, and it will take time for new job creation to shift the tide back to homeownership.

Increases in prices of finished wholesale goods will also ease this year, climbing about 3% in 2012 after a 4.8% jump last year. The slower pace will result largely from more-sluggish global economic growth -- weighed down by a recession in Europe. Although an increase in wholesales prices can signal coming inflation for consumers, the weak economy means firms aren't able to pass along all of their increased costs.

The overall trend of modest inflation will enable the Federal Reserve to pursue more easing of monetary policy if it deems such action necessary to nurture growth in the U.S. Though that's not likely, uncertainty over financial woes in Europe means another round of Fed easing cannot be ruled out.

Look for West Texas Intermediate (WTI) crude oil — the benchmark for U.S. oil pricing — to trade in the $90- to $95-per-barrel range into the spring, though occasional sharp ups and downs will continue to be part of the landscape.

But a huge overhang of supply of natural gas will keep prices relatively low — good news for consumers and businesses that rely on it for heating, or for the production of chemicals and other goods.

At Henry Hub, the pricing point for natural gas futures on the New York Mercantile Exchange, the price dropped a whopping 72¢ to $2.34 per million British thermal units between January 6 and 20. Prices briefly spiked to $2.67 after the announcement of output cutbacks by Chesapeake Energy, a major gas producer, but then quickly fell back to $2.50 after other drillers failed to follow Chesapeake’s lead. Gas should trade between $2.40 and $2.70 in coming months, thanks to continued mild winter weather and high stock levels.

Meanwhile, the recent volatility in the oil market, which has pushed prices over $100 per barrel, doesn’t indicate any looming imbalance in supply and demand. Rather, it's the product of hedge funds and speculators who play an increasingly larger role in oil trading. Any hint of market disruption sends them scrambling, causing prices to swing.

Most recently, traders have bid up the price of oil because of the Iranian threat to close the Strait of Hormuz in retaliation for increased U.S. sanctions. The strait links the Persian Gulf with the Indian Ocean; roughly 20% of the world’s oil supply passes through it daily. Any shutdown, however temporary, would cause prices to spike sharply. Traders also remain worried that European debt woes will worsen in 2012.

The national average price of gasoline, now $3.47 per gallon, is up from both last week and last month. It will fall as low as $3.40 in the next few months, a welcome relief from $4-a-gallon prices in the summer of 2011.

For truckers and other consumers of diesel fuel, the news isn’t so good. At $3.88 per gallon, diesel is holding on to a relatively high price, largely because exports are on the upswing.

The cost of heating oil, now $3.95 per gallon, is sure to rise even if the winter weather remains relatively mild in much of the country. It will likely retail between $3.90 and $4.10 per gallon.

Housing enters the new year with enough momentum to expect that starts, sales and prices a year from now will show some improvement. But gains will be slow.

Total housing starts declined in December, but still posted the second-highest monthly total of the year. That said, the year just ended was the worst on record for construction. Single-family starts added up to only 429,000. Add in the bright spot of multifamily starts — strengthened by demand for rental units — for a total of 607,000. Starts this year should reach about 720,000 — a healthy improvement, but less than half of the 1.5 million that had been considered normal.

And prices aren’t finished falling. We look for an additional 2% decline in the national average price by the middle of the year, followed by a leveling off and then a small 2% increase during the second half of 2012. The pattern in local markets will, of course, vary. Some that saw huge overbuilding, such as Las Vegas, can expect greater-than-average declines to continue, due to increased foreclosures and sales of distressed homes.

With homes becoming more affordable, sales of existing homes are picking up, rising at an annual rate of 5% in December across all regions of the country. We expect that pace to continue through 2012, bringing annual sales to about 4.4 million in 2012. No such luck for new-home sales, though. They’ll remain flat, at around 310,000 this year. Rock-bottom mortgage rates are a help, but more lenders are requiring a down payment of 20% and imposing other, more rigorous terms, discouraging some first-time buyers. Moreover, the National Association of Realtors says one-third of pending deals fell through in December, largely because of appraisals coming in below the negotiated price. That problem will continue for some months until distressed sales, about a third of total sales, run their course.

An end to the price decline is critical for recovery of the economy. The 33% drop on average since 2006 has cut into household wealth and discouraged consumer spending, which accounts for more than two-thirds of U.S. economic activity.

Expect retail sales to grow by 6% in 2012, somewhat slower than the 7.4% pace set in 2011. Consumers are gaining more confidence in the economy and are willing to spend on purchases put off during the recession. Holiday sales, which include November and December sales, minus restaurants and autos, grew 5% over the previous year.

Spending during the holiday season was helped by increased credit card use, up almost 10% in November, the latest figure available. It was the largest jump in consumer credit in 10 years. Consumers added $5.6 billion in revolving credit in November, the third straight monthly increase. Consumer confidence, which was up in each of the last three months of 2011, also helped holiday sales.

Still, look for retail sales to slow in the first half of 2012. They were up just 0.1% in December from the previous month. Electronic sales, usually strong right before the holidays, slipped 3.9% from November. Expect the slower sales growth to continue in the first few months, as consumers rein in spending, pay off credit cards and rebuild dwindling savings. Also, disposable income is unlikely to grow enough in 2012 to facilitate more robust growth.

Expect U.S. exports to continue to grow in 2012, although at a slightly slower pace than in 2011. The drop in exports in November to $177.8 billion, down 0.9% from October and the second consecutive monthly decline, foreshadows more export sluggishness in the first quarter of 2012 as shipments to Europe continue to drop. The 27 members of the European Union make up the U.S.’s largest trading partner, consuming about 15% of U.S. exports. Slower growth in emerging markets is also playing a role in dampening demand for U.S. goods.

However, we expect exports to rebound in the second half of 2012, finishing the year up about 12%, compared with a 15% pace in 2011.

Imports are also expected to rise this year, helped by reasonably solid pickup in U.S. demand for new automobiles and consumer goods. Expect imports to increase 12% this year, compared with 14% growth in 2011. In November, imports jumped to $225.6 billion, up about 1.3% from October, driven in large part by increases in both the price and amount of imported petroleum.

The trade deficit will climb to $605 billion this year, a 10% increase over 2011. The monthly deficit rose to $47.8 billion in November, up 10.4% from October after four months of decline. The trade deficit with the European Union increased to $9.6 billion in November, from $8 billion in October, because of the slowing demand for U.S. goods there.