Savannah Chamber

21 The Coastal Empire Leading Economic Index is designed to forecast regional economic activity during the upcoming nine-month period. The index increased at a solid pace through the third quarter of 2015. In 2014, the leading index surged 8%. By comparison in 2015, the index has gained roughly 5%. In general, this points to a more reasonable and sustainable pace of growth in the regional economy during 2016. The forecasting index primarily is developed from indicators characterizing the regional housing and labor markets, both of which hit important milestones toward the end of 2014 and held their favorable positions in 2015. First, after accounting for 20,000 new jobs generated since 2009, the number of initial claims for unemployment insurance (UI) fell below the level typically experienced during the pre-recession period from 2000 to 2007. Through November of 2015, there were about 730 new filings for UI per month. This is about 6% below the pre-recession monthly norm. This compares to about 835 per month (13% decline) in 2014 and 2,000 new UI claims per month when the worst of the regional job losses occurred in 2009. The second important milestone hit and maintained in 2015 was in residential construction. At the end of 2014, building permit issuance for single family homes equaled the 1995-2002 pre-building boom period of "normal" construction activity (after adjusting for population growth). Through October 2015, the number of permits issued increased about 30% as compared to the previous year. Further, building permit issuance has increased by an average of 23% for the past four years. The month number of permits issued in 2015 is now about 5% higher as compared to the precession norm of the mid-nineties through 2002. As indicated above, the bedrock foundation components of the regional economy are currently performing well (the coincident index). The regional forecasting index is foreshadowing continued growth in the Savannah metro economy in 2016, but somewhat below the pace achieved in 2015. Given the normalized conditions in the regional labor and housing markets, 2016 will be a year of sustainable growth closer to, but remaining above, Savannah's post-1990 trend rate of expansion. In 2016, employment in the Savannah metro area is expected to increase by roughly 2.2% to 2.5%. This remains above the long- term trend rate of employment growth, but below the 3% rate recorded in 2015. However, growth for 2016 remains sustainable because it is broadly based, lacking a reliance on any one sector to sustain the forward momentum. The annual unemployment rate for 2015 is on track to equal about 5.8% for the region. Continued employment growth will further reduce the unemployment rate to 5.5% for the year, with the likelihood that the monthly rate will approach 5.2% toward year-end. Turning to population growth, the region's long-run attractiveness as a place to live, work, and retire remains unaffected by short- run business cycles. Tourist demographics (13.5 million annual visitors) describe a very desirable pool of would-be in-migrants. The typical Savannah tourist is well-educated and has above-average income. Regional job creation and continued improvement in the housing markets that feed Savannah's in-migration should begin to influence population growth in the short-run. For 2016, population growth is expected to be approximately 1.2%, about the same as the typical pace of growth since 2010. In conclusion, the Coastal Empire Coincident Economic Index indicates the regional economy has been expanding for nearly six years, creating 20,000 new jobs along the way – all in the private sector. The regional forecasting index is sending the message of moderating, but sustainable growth for 2016. Current drivers in the economy are business/professional services, port activity, and tourism. On the goods-producing side of the economy, manufacturing will play a lesser role, while construction should step forward. Economic expectations for 2016 are relatively good, but below the performance of 2015. Nonetheless, 2016 will remain an above average year. Economic Foundations The remainder of the forecast considers expected activity in the six major underlying economic foundations of the Savannah MSA economy. Recall that these drivers are (in no particular order) manufacturing, the port, tourism, health care, the military, and real estate development. Manufacturing Savannah's show-case manufacturers continued to demonstrate strength through much of 2015. Gulfstream's second quarter sales topped $1 billion, the best since 2008. This, in addition to the company's then-$14 billion order book, supported 10,126 Gulfstream workers in the region who delivered 41 jets during the second quarter, an increase of 3 from the previous year. Additional test flights of the G500 continued in 2015. The aircraft is expected to be certified in 2017 and enter global service in 2018. Gulfstream also delivered its first G650ER to Qatar Airways, the first of as many as 30 expected to be delivered to the Qatar Airway's private fleet. However, in December, Gulfstream announced a streamlining move to reduce its workforce by about

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