Economy Heating Up Going Into New Year; Election Boom Typical; Gloomy in early 2003, firms seen investing as consumers ease up.(A)

Byline: JED GRAHAM

The best way to think about the economic outlook for 2004 may be to consider all the potential land mines that imperiled growth prospects a year ago but no longer loom so large.

"Iraq was staring us in the face" along with a risk of skyrocketing oil prices, said Stuart Hoffman, chief economist at PNC Financial Services Group. And a three-year bear market in stocks threatened to undo consumers amid continued job losses.

"Some of those fears turned into pluses," Hoffman said, as stocks rallied, the job market started to turn a corner and Iraq, while a trying slog, hasn't exploded into chaos.

"Compared to a year ago, it looks a lot more promising and a lot less likely something will come along and knock the economy off its feet," he said.

Rather than looking vulnerable as it did a year ago, the economy has a head of steam entering 2004 after growing at an 8.2% annual rate in the third quarter, the fastest since 1984. It will get another shot in the arm this spring when consumers reap a windfall from tax refund checks inflated due to the retroactive nature of last year's tax cut.

The real gusto behind growth in 2004 is expected to be business spending. With profits surging, inventories depleted and demand on the rise, companies have the wherewithal and the need to boost investment and hiring. All told, most economists expect the economy to grow at least 4%, with some expecting upward of 5%.