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22 The Savannah Outlook: 2018 Michael J. Toma Fuller E. Callaway Professor of Economics Center for Business Analytics and Economic Research, Business Innovation Group College of Business Georgia Southern University Jacob Foskey Research Assistant, Armstrong Center for Regional Analysis Since mid-2013, the Savannah regional economy has experienced substantial growth, a trend that is expected to continue through 2018. Indeed, the pace of economic growth in 2018 will exceed that of 2017 and will exceed the normal long-term trend for Savannah. This will take place within the context of continued economic strength in Georgia and improving growth in the U. S. economy. The underlying diversification of the region's economy contributes to its economic stability and vitality. For 2018, strength in port activity, real estate development, capital investment, and tourism should set the stage for growth that is above average 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 2018. General Conditions and 2018 Forecast The Center for Business Analytics and Economic Research (CBAER), a member of the Business Innovation Group in the 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: michael.toma@armstrong.edu). The Center produces the leading (forecasting) index and the coincident index of regional economic activity. 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 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 about 6%. After matching this rate in the first half of 2015, the pace moderated and treaded water late 2015. Annualized growth reached 2.6% toward the end of 2016 and accelerated in 2017, consistently reaching 3.3% growth. A primary coincident factor is nonagricultural employment in the Savannah MSA. Impressive job growth continued through the first nine months of 2017 (+4,900 jobs, +2.8%), however, the turbulent weather of the fall hurricane season reduced employment growth to 2.3% during the closing three months of the year. Overall, annual employment growth in 2017 was 4,600 jobs, a gain of 2.6%. Employment growth was strong in the service sector (+4,300 jobs, +2.8%) as leisure/hospitality (+1,400 jobs, +5.2%), business/professional services (+900 jobs, +4.7%), education/health (+800 jobs, +3.2%), and state/local government (+700 jobs, +3.4%) experienced notable gains. On the goods-producing (+400 jobs, +1.5%) side of the economy, construction employment boomed, rising by 500 workers (+7.2%) while manufacturing overcame early-year weakness with stronger growth in the second half of the year to hold steady in the full-year average. The pace of growth in leisure/hospitality and business/professional services is an important bellwether of strength in the regional economy. Many of these enterprises are small, locally grown firms and their growth reflects substantial