Outlook

As the U.S. economy struggles to stay out of recession in 2008, Birmingham and Alabama will fare better than the U.S. average, each with its own mix of industries and sectors. Birmingham will maintain a modest, healthy pace of expansion in financial services, healthcare, education and diverse manufacturing, helped by low business costs. Alabama coastal markets benefit from the Mobile port expansion and steel construction, while the rest of the state benefits from foreign-owned automobile manufacturing growth.

Upside Potential—events that could add to this growth:

1. Stable interest rates and currency values, removing elements of uncertainty in evaluating business expansion opportunities
2. Lower prices for energy, including crude oil, refined products and natural gas
3. Further expansion of automobile manufacturing in Alabama, attracting more suppliers, adding more well-paid hourly and salaried jobs, and reinforcing Birmingham as a major center for suppliers
4. Steady growth in tax revenues for cities, counties and state from income, sales and property taxes resulting from stable real growth and no change in tax rates
5. Attracting more bio-tech firms to Birmingham as a result of UAB’s biomedical research
6. More construction and retail growth from the Birmingham mayor’s proposal for a domed stadium and related development.

Downside Risks—events that could lower this growth:

1. Higher inflation, now in commodities, spreading to wages and consumer products
2. Weakness in jobs outside of housing and related financial services that lead to a broader recession in the U.S.
3. Unstable energy prices that provide neither relief nor incentives to explore
4. Further shifts in Birmingham bank headquarters from buyouts and consolidations