State Predicts Slow Growth and 3% Inflation
By Sonia Isotov
Down 0.3% from the 1.6% growth originally forecast, the Department of Business, Economic Development & Tourism (DBEDT) released its third quarter forecast with a prediction of slow growth for the rest of 2011, with normal growth forecast in 2012.
Overall, Hawaii’s economy, DBEDT is now projecting to show a 1.3% increase in 2011, and at this time, that growth is expected to increase to 1.8% in 2012.
The Honolulu Consumer Price Index (CPI), a common measure for inflation, increased 3.5% during the first half of 2011—primarily due to the shock in oil prices. DBEDT expects inflation to slow in the second half of 2011, ending the year with a 3% inflation rate in 2011 – higher than the 2.5% previously projected.
“Hawaii’s economy performed very well during the first half of the year, as reflected in the 9.7% increase in general excise tax collections, a rate we haven’t seen for five years despite the negative impacts from the Sendai earthquake in March,” said DBEDT Director Richard C. Lim, in a written statement. “Though we expect the economy will not be as robust during the second half of this year, we still anticipate some job growth in our economy.”
On the other hand, Lim added, “The slow growth of our economy here in Hawaii, coupled with the uncertainty and slowdown of the US and Japanese economies are a wake-up call for us. We must continue to shift Hawaii’s economy to a more independent and sustainable foundation.”
Other highlights from the third quarter release of DBEDT’s Quarterly Statistical and Economic Report include the following:
- Through mid-August, the state’s unemployment claims decreased by 10.8%, and Hawaii had the 9th lowest unemployment rate in the nation in July. The same trend is expected to continue for rest of 2011.
- Personal income in current dollars is expected to grow 3.8% in 2011, 0.2% higher than the growth in the previous forecast. However, due to higher projected inflation, the real personal income is currently projected to grow 0.8% in 2011, 0.2% below the previous forecast.
- Total wage and salary jobs in Hawai‘i are now expected to increase 1.5% in 2011, lower than the 1.8% increase previously projected. This downward revision is based on the weaker performance of tourism and a slowdown in the US national economy. DBEDT expects the job growth will increase to 1.8% in 2012.
- Though Japanese visitor arrivals have fully recovered from the March earthquake, arrivals to Hawaii from the US mainland have been below last year’s levels since June. DBEDT projects that visitor arrivals from the US mainland will slow in the second half of the year, especially from the US East market.
The department’s new forecasts show that visitor arrivals will increase by 3% for 2011, about 0.8% below its previous forecast, and visitor days will increase 4.4%, 0.7% lower than the previous forecast. DBEDT projects that daily visitor spending will continue to increase due to the depreciation of the US dollar and the continuous recovering of the hotel room rate. The forecast for visitor expenditure in 2011, thus, has been revised up.