2017 Industry Outlook: Peach State Progress

As we roll through 2017, the Peach State’s economy is clicking along.

Employment continues to rise, consumer confidence is growing and most of the high-dollar business sectors in the state are firing on all cylinders.

Each year, the Selig Center for Economic Growth at the University of Georgia’s Terry College of Business conducts research on economic, demographic and social issues to determine the outlook for the state’s primary industries, which you will find on the following pages. Barring unforeseen circumstances, the future of Georgia’s economy looks bright indeed.


New jobs and bigger paychecks will give more Georgians the confidence and wherewithal to buy homes, sustaining the current upturn in housing markets. The predicted improvements in labor market conditions and household formation, still-affordable – though higher – mortgage rates and growth in demand will help support recovery in homebuilding as well as renovation and repair activity.

First-time homebuyers are expected to account for a slightly larger proportion of home sales, reversing the prolonged slump in market share. First-timers are critical because they are not just exchanging one house for another, but rather are entering the market for the first time, catalyzing new home construction. Housing sales will not be too robust, however, because years of underbuilding has constrained supplies of new homes and listings of existing homes remain scarce.

Lumber & Wood

Higher production of lumber and wood products will be mainly due to the cyclical recovery of the nation’s housing markets. Housing and remodeling activity will grow faster than the overall economy, benefiting the lumber and wood products industry. The overall increase in demand for lumber and wood products therefore will also grow faster than either U.S. or state GDP.

Higher activity in private non-residential construction will also help to ensure that demand for overall lumber and wood products continues to advance at an above-average pace. Spending by government for construction also is expected to increase, adding to overall demand.


Furniture sales to households are poised to grow faster than GDP. Higher turnover of existing homes, more new home sales, more home renovations and home price appreciation are noteworthy positives for households’ demand for furniture. Household mobility and household formation also will be rising. An abundant supply of good used furniture will temper the industry’s recovery.

The outlook is less encouraging for sales of commercial and institutional furniture than for sales of furniture to households. Businesses’ spending for furniture will increase more slowly than GDP. Spending by the government will also increase.


Sales of new and used cars, SUVs and light trucks will rise, and automakers’ bottom lines will continue to improve. Larger gains in disposable income, more jobs, more confidence, better credit conditions, better fuel efficiency, low gas prices and the aging vehicle fleet will be powerful drivers of automobile sales.

The average light vehicle is 11.5 years old – an all-time record – reflecting improved durability and suggesting pent-up demand for new automobiles. The strong dollar will encourage U.S. consumers to purchase imported cars even as it reduces U.S. automobile sales in foreign markets.

Higher sales will help original equipment manufacturers, while older cars on the road will help manufacturers of replacement parts. An expected increase in miles driven will benefit auto parts and tire manufacturers.

Food Products

Accounting for about one-fourth of the manufacturing gross state product, food product manufacturing is Georgia’s largest manufacturing industry. This industry will expand its presence here, both in terms of output and employment.

The demand for food products will grow at a moderate pace. Food processing is highly competitive, faces very demanding consumers and must adjust to volatile commodity prices. Consequently, firms will have limited flexibility in pricing, and the industry’s already thin profit margins probably will not widen. Indeed, agricultural commodity prices could exert additional pressure on food processors’ margins. Another problem is that branded foods have lost market share to private labels, which are far less profitable for food processors.


Demand for many chemical products will increase in the typical cyclical fashion. The main opportunities for chemical manufacturing will be increasing use in construction, the growth of the industrial sector and higher sales for consumer use. The best prospects are for medicines, pharmaceuticals, paints and agricultural chemicals.

An abundance of shale gas has substantially lowered natural gas prices, providing U.S. manufacturers with a much-needed advantage in global markets. Despite this critical advantage in terms of lower feedstock costs, chemical production will gradually relocate to developing countries because of the costs of complying with U.S. environmental and security regulations.

Many of the chemical industry’s largest industrial customers already have moved to the developing world, so chemical production and research and development jobs will likely follow.

Pharmaceuticals & Medicines

Favorable demographics and cost effectiveness enhance prospects for pharmaceutical and medical supply firms. Sales will expand relatively rapidly, but profit margins probably will narrow. That is partially because sales of generic drugs will expand much faster than sales of branded products. Pressures from the federal government and other large buyers to hold down prices also will intensify. Domestic demand will grow steadily.

The industry continues to benefit from its new focus on marketing its products directly to the consumer. A number of new niche drugs – albeit fewer obvious blockbusters – in the development pipeline, better research and development techniques, and faster FDA approval of new drugs favor the industry’s long-term prospects.

Electric Utilities

Commercial and industrial electricity use will benefit from rising demand for most goods and services – there will be more new business startups, expansions of existing businesses and relocations, fewer closures of existing businesses and increases in manufacturing output.

Overall electricity use will rise more slowly than output because the manufacturing sector – and to a lesser extent the commercial sector – increasingly will generate electricity on site. Improved energy efficiency also will limit gains in commercial and industrial electricity use.

Sales to residential customers will roughly track increases in household formation, but greater use of energy-efficient appliances and more energy-efficient building codes suggest the incremental push to electricity sales per newly formed household will decline.


Due primarily to competition from digital media, Georgia’s printing industry will remain in secular decline, but the rate will probably decelerate. Increases in commercial advertising will be a tailwind for Georgia’s printing industry, but an increasing share of those dollars will be digital, reflecting the increasing amount of time people spend online as well as the decreasing time people spend reading printed material.

Slowly rising levels of office-based employment and a limited uptick in new business formation also will increase demand for printed materials. Increased revenue collections by local government will cause public schools and libraries to increase their outlays for printed materials. New nationwide standards for K-12 education also should boost book sales to schools.

Financial Institutions

The Federal Reserve will raise short-term policy interest rates in 2017, slowly unwinding its unprecedented easing policies. Market forces, however, will push up long-term interest rates by about the same amount as the Federal Reserve pushes up short-term rates. Consequently, the flat yield curve between the two-year note and the 10-year note will not steepen very much, which will make it difficult for banks to increase profits. The yield curve on home mortgages will be steeper, helping banks that originate mortgages.

Higher demand for most types of loans will support growth in banks’ profits and will help offset several unfavorable developments: fewer reserve releases, a dearth of mortgage refinancing and possible losses in banks’ bond portfolios should interest rates rise significantly faster than currently expected – an unlikely possibility.

Financial Planners

Short-term prospects for financial planners and stockbrokers call for revenues to rise faster than either U.S. or state GDP, reflecting growth in disposable personal income, increased employment, a 5 percent savings rate and high-net worth individuals’ recent wealth gains. Advisory fees will continue to benefit from high equity prices and the increased value of assets under management.

Increases in longevity and the median age of the population along with concerns about the viability of Social Security and other pensions favor stockbrokers and financial planners. The movement toward retirement plans based on defined contributions, rather than defined benefits, supports financial planners, stockbrokers and the stock market in the long term. Going forward, modest increases in the average retirement age and/or labor force participation by persons 65 and over will also benefit this sector.

Residential Real Estate Firms

Increases in sales of new and existing single-family homes will boost commissions earned by Georgia’s residential real estate brokerage firms, which will also benefit from more active multi-unit housing markets. Additional easing of credit standards, slightly more confidence in real estate as an investment, appreciating home prices and the stronger job market will be among the factors that will bolster recovery for residential real estate firms. Georgia’s real estate industry also is well positioned to benefit from the retirement of the baby boomers – a strong demographic trend that is virtually locked in until approximately 2028.


Georgia retail sales will rise by 5.5 percent, exceeding the 4.5 percent gain expected for U.S. retail sales. Low-end and high-end retailers will fare better than mid-market retailers. Multi-channel retailers that fully integrate electronic and physical stores will fare better than those that do not.

The brick-and-mortar retailers with the best prospects include wireless stores, off-price luxury stores, discounters, drugstores and a variety of specialized small-format grocery stores. The strongest malls will do very well, but non-competitive malls will see more vacant storefronts.

The brick-and-mortar retailers with the worst prospects are those that face the most intense digital competition, including bookstores, video stores, shipping/postal stores and stationery stores. Unionized grocery, office supply and mid-priced apparel/department stores also will struggle.

Employment/Staffing Services

Staffing and temp agencies should do well because the modest pace of economic growth encourages many firms to remain flexible and responsive to changing economic conditions. Demand for employment and staffing services tends to move in lockstep with GDP and lead growth in permanent hires. The forecast for continued growth of the state and national economies therefore bodes well for the employment and staffing services industry.

However, the state’s low unemployment rate will restrain growth of the staffing industry in two ways. First, workers will be less willing to accept temporary positions, since permanent jobs may be seen as more available. Second, the supply of suitable temporary workers will be more constrained than it was when the unemployment rate was higher.

Consulting Firms

The outlook for consulting firms is positive, since business and governmental operations and decisions are increasingly complex and maintaining a range of in-house experts is expensive. The continuing – albeit modest – economic expansion, growth in corporate profits, more business expansions and relocations and higher revenue collections by local and state government budgets will bring prosperity to many consulting firms. Opportunities for domestic consulting will be better than for international consulting. One problem for consulting firms is that more clients are suing for malpractice when things go wrong.

Legal Services

Cyclical increases in demand for legal services will help lawyers and law firms. The ongoing recovery of housing and nonresidential construction will boost the amount of money businesses and households spend on legal fees. Firms that provide legal services to households should do better as disposable personal income and the number of jobs grow significantly. Law firms that provide services to businesses will benefit from increases in the number of business startups, expansions, and mergers and acquisitions. Businesses also typically devote more resources to litigation when corporate profits are on the upswing.


The outlook for Georgia’s health providers is good, but not exuberant. Uncertainties regarding the Affordable Care Act, Medicaid and Medicare cloud the outlook for the industry. Nonetheless, this sector will be one of the better performers. Large numbers of baby boomers are reaching the age where the incidence of heart attacks, strokes, cancer and other care-intensive problems begin to rise rapidly. Basically, the population of persons with multiple chronic health conditions that require physical care continues to grow regardless of the ups and downs of the business cycle.

Dental Services

Despite better preventive care, demand for dental services will continue to grow as standards of acceptable dental care and beauty continue to rise. The aging of restorative work performed on baby boomers also will contribute to demand growth. Higher incomes and more dental plans will allow consumers to invest more in preventive and cosmetic procedures.


Hospitality will outperform the overall economy. The gains will be broadly based across both limited service properties that cater primarily to tourists and full-service properties that are popular with business travelers. Lodging demand will rise significantly from already elevated levels. Because the lodging market is not oversupplied, the benefits to the industry from higher demand will be significant. Due to the industry’s impressive performance, most in-state lodging markets will see new development, but the number of new hotel rooms will not outpace demand. Revenue per available room therefore will grow at least twice as fast as GDP. On top of higher demand, increased use of many hotel services will bolster revenue per available room.


The outlook for the restaurant industry calls for the eighth straight year of sales growth. Consumers’ overall expenditures will increase at about the same pace as state GDP. Quick-service sales growth will outpace table-service sales growth, with fast-casual restaurants faring especially well. Bars and taverns will see very slow growth, whereas cafeterias and buffets will see sales decline.

There will be more emphasis on home delivery. Food trucks and street food also will increase in popularity. Supporting factors include population growth, employment growth, personal income growth, relatively low gas prices, busier households, more business activity, and more travel and tourism. Due to a lower unemployment rate, finding qualified and motivated employees will be a more difficult task for restaurants.

Categories: Business Industry, Features