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20 The Savannah Outlook: 2016 Michael J. Toma, Fuller E. Callaway Professor of Economics Kayla Judah, Research Assistant Center for Regional Analysis, Department of Economics Armstrong State University The Savannah metro area economy expanded rapidly in the first half of 2015, and began settling into a more sustainable pace during the latter portion of the year. The past 30 months have witnessed substantial growth in the regional economy that is expected to ease somewhat in 2016. Still, the upcoming year will feature growth that is above normal trend for Savannah. Continued growth in the regional economy will take place within the context of growing strength in the state, but moderating growth in the U. S. economy. The underlying diversification of the region's economy contributes to its economic stability and vitality. For 2016, strength in tourism, port activity, business services, 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 2016. General Conditions and 2016 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 in 2012. In the latter half of 2013 and through 2014, the pace of expansion quickened substantially as the annualized rate of growth reached 5.2%. After nearly matching this rate in the first half of 2015, the pace has eased to 3% through the third quarter of 2015. 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. Impressive job growth characterizing the first half of 2015 (+6,300 jobs, +4.4%) has moderated in the second half, settling in to a more sustainable pace (5,000 jobs, +3%) in data through the third quarter. Employment growth was strong in the service sector, as business/professional services, transportation, and retail trade led the gains, with leisure/hospitality offering modest support. On the goods-producing side of the economy, manufacturing surged while construction held the gains it secured in 2014. Business/professional services alone added about 2,600 jobs, just over half the total regional employment growth recorded through the third quarter of 2015. This reflects continued notable strengthening in the regional economy, as 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, particularly in the first six months of the year. Gains in retail trade reflect improving consumer confidence and continued growth in the regional tourism industry. The remaining coincident indicators (port activity, electricity sales, consumer confidence, airport boardings) were improved as compared to 2014. Port activity charged out of the gate fast and recorded over-the-year growth of over 20% in the first half of the year, a result of west coast port labor strife. As labor reached a new agreement in the west, trade eased, but remains up about 8% through late in the calendar year. Indicators of the tourism industry also demonstrated considerable strength, with hotel room revenue up by 10% and boardings at the airport up by 7%. Lastly, electricity sales, which are a broad indicator of general growth in residential, commercial and industrial activity, increased modestly.