(FORTUNE Magazine) – Economic growth should continue at a respectable 2.5% or better rate in 1995. But within that broad trend, some industries will reap big gains, while others will suffer the woes of higher interest rates, reluctant consumers, and an aging economic expansion. Here is a look at the winners and losers among 15 major industries.

AEROSPACE-Sales look bleak, but profits don't

Weak orders for civilian aircraft and declines in defense spending have darkened the skies over America's aerospace industry. Total sales, which reached a high of $139 billion in 1991, are expected to be $113 billion in 1994 and to fall to $109 billion in 1995, according to the Aerospace Industries Association. The slowdown has led to sharp cuts in R&D spending as well as a surge in industry mergers. That has been good for the industry's earnings; operating margins averaged a healthy 10% in 1994, says Cowen & Co. analyst Cai von Rumohr. But employees should still expect more pink slips. AIA economist David Vadas expects employment, estimated at 836,000 in 1994-down by more than one-third from five years ago-to fall by at least another 34,000 in 1995.

AIRLINES-A return to profits, barely

After four years and $12.8 billion in accumulated losses, the airline industry finally pulled out of its tailspin in 1994 to fly again-albeit at no great altitude. Led by a surge in passenger traffic, total profits are estimated to be $500 million in 1994 and $1 billion this year, according to David Swierenga, chief economist for the Air Transport Association. That's welcome news, but not nearly as robust a revival as the industry needs. "At that rate of earnings recovery," says Swierenga, "it will take us 25 years to recoup."

The persistent problem is a combination of high costs and constant fare wars. No-frills, point-to-point carriers, which fly high-traffic routes, have increased, stealing the bread-and-butter business from bigger carriers and spawning price cuts. On the expenses side, the heaviest burden to date has been labor, but this year fuel costs could be troublesome. On top of possible price hikes in crude oil, a jet fuel tax increase scheduled to go into effect in October is expected to add $527 million annually to charges.

AUTOS-Sales won't peak until 1996

It must be love. Americans continue to buy new cars despite the steeply higher costs of financing those purchases. Sales of new cars and light trucks reached 15.1 million units in 1994. That's a six-year high, and sales should accelerate to 15.6 million vehicles in 1995 and 16.2 million in 1996, says Ronald Glantz, an analyst at Dean Witter. Rising interest rates will "moderate" demand in the months ahead, says Glantz, but there's enough momentum to keep Detroit's profits on an impressive uptrend, rising from $14.6 billion in 1994 to $19.7 billion in 1995 and $26.8 billion in 1996.

Helped by a weak dollar, Detroit should enjoy a bigger piece of the American market. Japanese car and light truck prices rose $670 more per vehicle, on average, than the Big Three's vehicles. By expanding truck manufacturing capacity and concentrating on the small-family market, Motor City should increase its market share 0.7% in 1995, says Glantz. But Japan is fighting back. Maryann Keller of Furman Selz says Mitsubishi improved its U.S. market share 0.4% in 1994, primarily through inexpensive lease deals.

COMPUTERS & SOFTWARE-Booming sales, battered margins

Worldwide unit shipments of PCs will grow about 15% both this year and next, according to Dataquest, a market research company based in San Jose, California. Domestic sales will increase more slowly, but only by a percentage point or so. Of course, in the PC business the dollars never seem to come in as fast as the hardware goes out. Dataquest predicts that dollar sales through 1996 will rise between 6% and 8% worldwide, and less than 6% in the U.S. That means continued pressure on profit margins.

On the software side, the outlook is bright-as long as you're Lotus or Microsoft. Paine Webber analyst Michael Kwatinetz thinks the two software heavies will show double-digit earnings-per-share gains over the coming two years. The rest of the software world will likely look longingly on that performance. Jeffrey Henning, vice president of Perseus Development, a startup software company near Boston, says that with some 12,000 new programs and upgrades coming on the market every year, competition among smaller software developers is brutal. "I've seen the future of the software industry, and boy is it ugly," he says. "Ugly, that is, if you want to make much money at it-beautiful if you're a user." Even in the booming multimedia business, margins are getting tight. Says Dataquest analyst Suzanne Snygg: "Prices have crashed. We're talking multimedia CD-Rom products that used to cost $40 or $50 apiece. Now you can get a four-pack for $20."

FINANCIAL SERVICES-It's easy money no more

Rising interest rates have put the kibosh on the banking recovery. Facing big losses on their bond portfolios, and thinner spreads on loans with each new rise in the short-term rates, banks know that profits will no longer be gushing as they were in 1993. But strong loan volume should forestall a decline, says James Chessen, chief economist of the American Bankers Association. Overall, he predicts bank industry profits will reach $44 billion in 1994 and match that in 1995, vs. a record $42 billion in 1993.

Other financial institutions may be on a downtrend. New investment in mutual funds was down 56% through October 1994, according to the Investment Company Institute. Bond fund losses lured investors to safer money-market funds and bank certificates of deposit. Investors pulled $26.7 billion out of bond funds from March through September, and the rate of new money flowing into stock funds is down 18% since April. "The great stampede of people into mutual funds is over," observes Michael Metz, chief investment strategist at Oppenheimer & Co.

Profits on Wall Street were clobbered in 1994. They're expected to fall 80%, to $1.8 billion, from last year's record $8.6 billion, says the Securities Industry Association.

HEALTH CARE SERVICES-Trimming the fat

Hillary's grand plan may be history, but the pressure isn't off America's big health care suppliers. With corporations and other health care sponsors looking to cut costs, providers are consolidating and developing more efficient delivery systems, says Scott Mackesy, analyst at Dean Witter.

Hospitals are streamlining services as well as targeting specialized laboratories, repetitive tests, and staffs as prime areas for cuts. HMOs are taking the scalpel to costs too. Combine the expected cost improvements with rising enrollments-up nearly 12% in 1994-and HMOs should be able to cut premiums 1.2% in 1995 and still enjoy double-digit profit growth.

HOTELS & CRUISE LINES-It's a full house

No vacancy signs are lighting up, and so are the bottom lines of the nation's hoteliers. Rising demand and a steady room supply have reversed a four-year downturn in profits. The average occupancy rate was 65.2% in 1994-the best in 12 years-and is expected to reach 67.5% in 1995. Tennessee-based Smith Travel Research, which tracks the hotel industry, estimates pretax profits of $2.7 billion in 1994, vs. $2.4 billion in 1993.

Among the most popular rooms are those on ships. According to Cruise Lines International Association, 4.8 million North Americans spent an average of $175 to $225 per person per day on pleasure cruises in 1994. That's a 7.5% increase over 1993. Industry revenues, which total some $7 billion, are expected to grow steadily as ship capacity expands. By 1998, 25 new ships with an additional 40,000 berths are scheduled to launch. CLIA projects that by 2000 as many as eight million passengers per year will cruise.

HOUSING-The peak is past

Among the first victims of higher interest rates is housing. Single-family housing starts have already begun to recede; they were down 6% in October and declined another 4% in November vs. a 6% rise in September. The National Association of Home Builders expects the new downtrend to continue. The Association predicts housing starts in 1995 will drop 2%, to 1.39 million.

Sales of existing single-family homes remained stable in 1994, according to the National Association of Realtors, but are expected to slow in 1995. The association expects 3.7 million homes to be sold in the new year, down from 3.9 million in 1994.

METALS & MINING-Shortages may lie ahead

As global growth unfolds, the outlook for steel, aluminum, and copper gleams as brightly as newly minted money. Demand is strong, production is tight, and inventories are being depleted. Steel mills are operating full tilt, at 93% of capacity, and orders are exceeding deliveries by 5% or more. In response to production shortfalls, steel imports have been rising, now accounting for 30% of total U.S. consumption. Almost one-quarter of the purchases have been from domestic steel companies desperate for slab and semifinished products, the raw materials for finished sheets. Further, rising prices for foreign steel could choke off that supply. "The United States is in the grip of a major steel shortage," says Prudential Securities analyst J. Clarence Morrison. "And we are projecting a world shortage by late 1996." Morrison is looking for average world steel prices to rise 5% to 7% this year and 10% to 15% next. He expects integrated steel company revenues to track the metal's price gains, while operating profits should double this year on average and rise another 50% in 1996.

Prices for copper and aluminum should also rise with world demand, although nowhere near the 70% or so hikes in 1994. Copper prices, recently $1.36 a pound, could reach record highs above $1.50, says Joseph Rosta, research director of CPM Group, who is projecting a supply deficit for the metal this year. Aluminum prices have been soaring on strong demand and limited production, in accordance with a cutback agreement among major world producers signed last January. But further increases in the price of ingot, now 84 cents per pound, will be tempered by an inventory overhang, currently twice the supply necessary to feed the pipeline.

OIL & GAS-Get ready for $20-a-barrel crude

The global economic recovery finally seems to be in full swing, and that's great news for energy producers. NatWest Securities forecasts that worldwide oil consumption will rise 2.7% a year for the rest of the decade, a sharp acceleration over the 0.9% annual increases of the first half of the 1990s. Much of the new demand will come from developing nations in Latin America and Asia, most notably China. Rich nations will increase their petro-appetites too, says NatWest analyst Adam Sieminski, as the fervor for energy conservation cools. "Fuel hogs are back," he says. "Everybody's driving jeeps, minivans, and pickup trucks," none of which are known for anorexic gasoline consumption.

Assuming no major supply surprises, such as Iraq's reentering the market, increased demand equals higher prices. Sieminski predicts that the price of a barrel of benchmark West Texas Intermediate will float around $20 this year and $21 in 1996, vs. just over $17 last year.

The glow has dimmed somewhat on the outlook for natural gas. Depressingly nice weather in 1994 (apart from last winter) and a strong increase in Canadian exports drove down the price of spot wellhead gas to $1.75 per million BTUs at the end of 1994, well below the $2.50 price as of last winter. John Lichtblau, chairman of the Petroleum Industry Research Foundation, thinks natural gas prices will wallow in the $1.65 to $1.75 range this year. Looking beyond 1995, he notes that underlying demand will remain strong and that supply increases should taper off during this year, giving prices a slight lift in 1996.

PAPER & FOREST PRODUCTS-Talk about pricing power

Prices of most paper grades rose dramatically in 1994 and are expected to continue climbing early in the new year. Pulp is up 75% since late in 1993, newsprint more than 30%, and linerboard, used to package consumer goods and make corrugated boxes, has risen more than 35%. With that kind of pricing power, paper company earnings are on a tear, up more than 100% in 1994 and expected to more than double again in 1995, says analyst Mark Rogers at Prudential Securities.

Lumber prices will continue climbing too, though not as dramatically. Demand for lumber is running up against a thinning supply of timber as environmental regulations leave fewer trees to cut. Analyst Joshua Zaret at Nomura Research Institute sees overall production rising only 2.5% in 1995, vs. a 4% increase in 1994. That should translate into price increases of 5% or so for such high-volume items as softwood, used for housing construction, and about the same for oriented strandboard, used for structural panels.

PHARMACEUTICALS-Slow growth and lots of mergers

Price competition, government mandates, and penny-pinching managed-care buyers are squeezing the drugmakers' bottom line, says Bob Hodgson, analyst at Cowen & Co. He predicts that average earnings growth at the nine companies he follows will be only 5% in 1994-down from 12.4% in 1992- before rising 6% in 1995 and 1996.

Generic drugmakers' strong existing markets and new avenues for growth-some 40 drugs came off patent in 1994-should assure continuing penetration. Their market share is expected to reach 40% in 1994 and 50% to 60% by the turn of the century, according to David Saks, drug and health care analyst at Gruntal Investment Research. Hoping to cut into the generic boom, brand-name companies are introducing generic versions of their drugs immediately before they come off patent.

Expect more mergers and acquisitions. Jack Lamberton of NatWest Securities thinks deteriorating prices, declining demand, and significant overcapacity make pharmaceutical companies prime targets for M&A activity. "Plus," says Lamberton, "drug companies have tremendous cash flows, which makes for painless acquisitions."

RAILROADS & TRUCKING-Lean, mean, and ready for anything

With industrial production and GDP on a roll, the railroads earned record profits in 1994. They should rise another 10% to 25% in the year ahead, says Burton Strauss, analyst at Lehman Brothers. But isn't the economy supposed to slow down some? Yes, but as Strauss points out, the railroads' fortunes aren't as cyclical as most people think. After years of cutting costs and wringing ever more efficiency out of smaller payrolls, the industry is in excellent health. In addition, core businesses are still heavily weighted toward bulk commodities like coal and grains, which tend to resist the vicissitudes of the economy.

Among truckload carriers-the ones that haul a trailerful of goods from one client at a time-industry consolidation is a boon to the biggest players, according to Alex. Brown analyst John Larkin. As customers whittle down the number of shippers they use, large publicly traded operators like Swift Transportation and Heartland Express could improve earnings by 15% or more annually over the coming five years.

Riches in the less-than-truckload (LTL) business are going more to the regional companies. Larkin says that big, highly unionized national operators like Yellow Corp. and Arkansas Best face much higher labor costs than smaller, non-union regional companies like Old Dominion Freight Line and American Freightways. The regional LTLs ought to see earnings growth between 15% and 30% a year through the end of the decade, or "as quickly as they can add to their networks," says Larkin.

RETAILING-Where are the women?

If you take the women out of retailing, what's left? Plenty, it turns out. Sales in women's apparel stores plunged about 7% last year-unprecedented. Yet sales at general merchandisers such as department and discount stores rose a solid 7%. Furnishings and hardware stores rode the jump in home sales to double-digit gains. And men's clothing stores racked up their biggest annual sales gain on record-some 20%.

Women's spending has picked up a bit lately, and experts predict more improvement in 1995, but most don't expect a surge. "A terribly important development over the past few years has been the relaxed dress codes-you no longer need go broke to dress for work," says Kurt Barnard, an industry forecaster in Berkeley Heights, New Jersey. "We will see a deepening of this trend." In contrast, the trend has been a boon for men's stores as guys stock up on casual wear that is dressy enough for the office. Carl Steidtmann, research director at Management Horizons, a consulting firm, looks for continued success of chains like Structure, Men's Wearhouse, and Today's Man that cater to, and drive, the demand for upscale casual wear.

TELECOMMUNICATIONS-Looking for double-digit growth

For all the highfalutin talk about telecom these days, it's the mundane parts of the business-telephone calls, for instance- that really make the industry hum. According to David Yedwab of Eastern Management Group, a consulting firm in New Jersey, traffic on domestic phone lines has been growing about 12% annually and should continue on that path over the next two years. International business will continue to expand at its present 20% annual pace.

As for revenues, Yedwab expects 8% to 10% growth for domestic business and 12% to 15% for international. S.G. Warburg analyst William Deatherage estimates that earnings-per-share increases for the Big Three long-distance companies will average 10%, coming on top of a 14% increase in 1994. The regional Bell operating companies (RBOCs) should increase earnings 6% on average, ranging from 3% at Pacific Telesis to 15% at Nynex. Says Deatherage: "There's good growth in the core businesses at a time when you have declining costs. That's a pretty powerful combination. When you throw on top of that the potential of new consumer services, the opportunities are huge."