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43 The Savannah Outlook: 2019 Michael J. Toma Fuller E. Callaway Professor of Economics Center for Business Analytics and Economic Research, Business Innovation Group Parker College of Business Georgia Southern University Jessica Longoria Research Assistant, Center for Business Analytics and Economic Research Since mid-2013, the Savannah regional economy has experienced substantial growth, a trend that eased in 2018, but is expected to improve in 2019. The pace of economic growth in 2019 will exceed that of 2018, but is expected to be modest as compared to the past few years. This will take place within the context of continued economic growth in Georgia and the nation. The underlying diversification of the region's economy contributes to its economic stability and vitality. For 2019, strength in port activity, real estate development, capital investment, and tourism should set the table for growth that is nearly normal for employment and the overall economy. The diversification of the regional economy is provided by the strength of its underlying economic drivers that are (in no particular order) manufacturing, the port, tourism, health care, the military, and real estate development. Each of these facets of the regional economy will be discussed after the presentation of a general economic forecast for the region in 2019. General Conditions and 2019 Forecast The Center for Business Analytics and Economic Research (CBAER), a member of the Business Innovation Group in the Parker College of Business at Georgia Southern University produces the quarterly publication, Economic Monitor, that analyzes current economic conditions in the Savannah MSA (Chatham, Bryan, and Effingham counties), and presents short term forecasts for the area (email: mtoma@georgiasouthern.edu). The Center produces the leading (forecasting) index and the coincident index of regional economic activity in the Savannah metro area. The coincident index of economic activity is designed to measure the regional economic "heartbeat" based on factors characterizing the underlying foundational components of the Savannah metro area economy. Following the severe recession of 2007-2009, the Savannah Metro Business coincident index stabilized early in 2010 and started a modest upward trend in 2012. In the latter half of 2013 and into early 2015, the pace of expansion quickened substantially as the annualized rate of growth reached about 5%. The pace slowed later in 2015, but recovered to reach 3.4% by mid-2017. Annualized growth averaged about 2.5% toward the end of 2018 even as employment growth slowed to a crawl. A primary coincident factor is nonagricultural employment in the Savannah MSA. Employment growth eased through much of 2018 and flattened to the point at which employment was only slightly above the previous year level: a gain of 600 jobs (+0.2%). Overall, employment increased to about 179,000 toward the end of 2018. Growth was strongest in manufacturing (+500 jobs, +3.5%), transportation (+300 jobs, +4.6%), wholesale trade (+200 jobs, 2.9%), and construction (+200 jobs, +2.5%). Other sectors of the economy generally held steady, except for retail trade that shed 400 workers in 2018. The pace of growth in leisure/hospitality and business/professional services is an important bellwether of regional economic activity. Many of these enterprises are small, locally grown firms and their recent modest growth reflects increasing headwinds for these sectors and the underlying economy. In fact, business/professional services gave up all of its early-year gains to finish with a loss of about 1,400 workers by year-end. Weakness faced by firms in business/professional services represent slackness in the overall demand for business support services and regional economic activity. The remaining coincident indicators (port activity, electricity sales, hotel room revenue, airport boardings) were improved in 2018 as compared to 2017. Port activity (containers handled) increased substantially during the year (+11%). Indicators of the tourism industry also demonstrated strength, with hotel room revenue increasing about 5% and plane boardings at the airport up 16%. Electricity sales (a broad indicator of growth in residential, commercial and industrial activity) increased 4.6%, while retail sales surged nearly 10% from hurricane-disrupted activity of the third quarter of 2017.