Savannah Chamber

11 5 wholesale trade also will see solid employment gains. The federal government and utilities are the only major sectors expected to lose jobs. U.S. manufacturers will continue to hire, primarily due to cyclical factors such as growing demand for durable goods rather than long-term structural shifts in competitiveness. Nonetheless, because the economies of EU and Japan have performed poorly, manufacturers who want, or need, to locate in developed economies increasingly will opt for locations in North America. Durable goods manufacturing subsectors with the best immediate prospects for job growth include wood products, machinery, non-metallic mineral products, furniture, and fabricated metal products. In contrast, manufacturers of nondurable goods will be cutting their workforces modestly. Among nondurables subsectors, only food, chemicals, and plastics/rubber manufacturers will see positive job growth. obs will be lost in the textile, apparel, paper, and printing industries. Corporate Profits Already high after-tax corporate profits should eke out single-digit percentage gains in 2015. Excellent expense management, low debt burdens, and more broad-based growth in demand for goods and services will be the primary factors supporting profit growth. Financing also should be somewhat easier to obtain, but more expensive. Nonetheless, continued easing of lending conditions improves prospects for profits earned by smaller companies. The upturn in the housing market will be the primary factor contributing to profit growth. Productivity growth is likely to be stronger in 2015 than it was in 2014, which is a panacea for profits as well as the overall economy. On the negative side, the year-over-year comparisons will be extremely tough to beat. Businesses' pricing power is not expected to firm significantly. Finally, it's important to recognize that financial institutions' profit margins will be sensitive to problems stemming from Europe's sovereign debt crisis as well as higher long- term interest rates. Indeed, the slow expansion of foreign GDP will limit sales prospects for many export- oriented companies. But corporate profits generated from international operations in emerging markets will grow faster in 2015 than in 2014. Business Spending Due to slightly faster growth in both corporate profits and end markets, the year-over-year percentage increases in business spending for equipment will be larger in 2015 than in 2014. Spending will grow almost three times faster than GDP, reflecting the need to replace equipment, to improve productivity, and to become less labor intensive. Strong cash flows and easier (but more expensive) credit will drive this spending. It helps that corporate discipline with respect to capital outlays has been excellent. Also, lending standards will continue to ease in 2015. Plus, many companies have adequate cash flows relative to the amount of money they need for investment, lessening the impact of lingering credit constraints or higher interest rates. But after-tax corporate profits will grow more slowly in 2015, partially because profits are already at high levels relative to the overall size of the economy. Business spending for communications equipment will post the largest year-over-year percentage gains. Substantially higher spending also is expected for industrial equipment as well as computers and peripherals. Spending for transportation equipment will increase only slightly. Slightly below average levels of capacity utilization will be a mild head wind for business spending for equipment and software. In mid-2014, capacity utilization for industries producing crude products was 87 percent, which is above its long-run average and therefore should spur capacity additions. For goods at the finished stage, capacity utilization was 77.6 percent, a rate that's also above its long-run average. In

• Cover