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21 The Savannah Outlook: 2015 Fuller E. Callaway Professor of Economics Michelle Burghardt, Research Assistant Center for Regional Analysis, Department of Economics Armstrong State University Michael J. Toma The Savannah metro area economy expanded rapidly through the first half of 2014, but settled into a more sustainable pace in the latter portion of the year. The past 18 months have witnessed substantial growth in the regional economy that is expected to continue through 2015. The upcoming year will feature growth that is well above average, and will likely be characterized as a "good year." This continued improvement in the regional economy will take place within the context of growing strength in the state and U. S. economy. The underlying diversification of the region's economy contributes to its economic stability and vitality. For 2015, strength in tourism, port activity, business services, along with increasing strength in manufacturing and the housing market should set the stage for above-average employment and economic growth. 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 2015. General Conditions and 2015 Forecast The Center for Regional Analysis at Armstrong State 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 (available at www.armstrong.edu/economic_monitor). The Center produces the leading (forecasting) index and the coincident index of regional economic activity. Following the severe recession of 2007-2009, the Coastal Empire coincident index stabilized late in 2009, and started a modest upward trend of 1.8% growth through mid-2013. The pace of expansion quickened substantially in 2014, rising to 4.2%, based on data through the third quarter. 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. A primary coincident factor is nonagricultural employment in the Savannah MSA. Substantial job growth characterized the first half of the year (+2,000 jobs) and moderated somewhat toward a more sustainable pace of growth in the third quarter (+700 jobs), yielding 2.3% growth on an over-the-year basis. Through November 2014, employment growth was strong in the service sector, as business/professional services, transportation, leisure and hospitality, and state government led the gains, with education/health offering modest support. On the goods-producing side of the economy, manufacturing held steady while construction added several hundred jobs for the first time since 2007. The increase in business/professional services employment reflects notable strengthening in the regional economy. As the economy grows, support services offered by firms in this sector represent an important source of new demand for labor. Transportation gains can be attributed to continued record-setting volume of trade through the port, while leisure/hospitality gains reflect continued growth in the regional tourism industry. The remaining coincident indicators (port activity, electricity sales, consumer confidence, airport boardings) were much improved as compared to 2013. Port activity charged out of the gate fast and maintained strong over-the-year growth of about 10% through late in the year. Indicators of the tourism industry also demonstrated considerable strength, with hotel room revenue up