Hawai‘i’s Economy on Path to Moderate Growth
Hawaiʻi’s economy continues on a path towards moderate growth in the coming years according to a second quarter 2017 Statistical and Economic Report compiled by the state Department of Business, Economic Development and Tourism.
Department representatives say they are encouraged by economic data from the first quarter. Labor force and employment created new record high levels during the first quarter of 2017 and non-farm payroll jobs showed a historical best first quarter. Hawaiʻi’s non-seasonally adjusted unemployment rate was also the lowest among all the states in the nation, while visitor arrivals increased 3.1% and visitor expenditures jumped 10.4% during the quarter.
The construction industry also showed great improvement as the value of private building permits increased 66.3% during the first quarter of 2017. The value of residential permits increased 126.8%, commercial and industrial permit value increased 203.2%, and value of additions and alterations increased 6.1%. The value of government contracts awarded also surged 22.1%. As a measure of construction completed, the contracting tax base reached $8.3 billion in 2016, a new record year in nominal dollar terms.
“It’s encouraging to see our first quarter numbers, which signals our economy is on solid footing,” said DBEDT Director Luis P. Salaveria. “We are on track to see more than 9 million visitors this year, and we expect to see our construction industry accelerate our economic growth.”
According to US Bureau of Economic Analysis, Hawaiʻi’s real gross domestic product, the most comprehensive measure for final goods and services produced in an economy, grew 2.1% in 2016, and over-performed the US economic growth at 1.6%.
The most recent economic forecast for the US and the world indicates that most of the economies of the world, especially those our visitors are coming from, will experience continued economic growth in 2017 and 2018. The US economy is expected to grow by 2.1% in 2017 and 2.4% in 2018, both are higher than the growth rate of 2016.
DBEDT revised its projection on Hawaiʻi’s economic growth slightly upward for 2017, from 1.8% projected in the previous quarter to 1.9%, mainly due to the better than expected performance in the tourism industry. DBEDT kept the economic growth for outer years unchanged from the previous quarter projection at 1.7% for 2018 and 1.6% for both 2019 and 2020.
“At the beginning of the year, airline schedules indicated that we would have 0.5% decline in air seats this year. But by March this year, updated airline schedules indicated that there would be a 1.3% gain in air seats for 2017. There will be one new international route added, AirAsian X, three flights a week from Kuala Lumpur via Osaka to Honolulu, on June 28 this year,” said Chief State Economist Dr. Eugene Tian. “There will be a few new routes added from the US mainland to the neighbor islands this year. The additional routes are the main reason for the revision to our visitor forecast for 2017. ”
According to DBEDT’s passenger count data, total passengers to Hawaiʻi increased 7.7% in April 2017, as compared with the same month last year. Passengers on domestic flights increased 8.4% and passengers on international flights increased 5.6%.
After the record year of 2016, Hawaiʻi’s labor force and employment continued growing and set new record levels in the first quarter of 2017 with 695,650 people in the labor force and 676,400 people employed. Statewide unemployment rate (not seasonally adjusted) averaged at 2.8% during the first quarter of 2017, continued to be lower than the US average unemployment rate of 4.9% and ranked the lowest in the nation.
DBEDT expects that the non-farm payroll job count will grow by 1% in 2017 and fall to 0.8% in 2020. This is a downward adjustment when comparing the forecast last quarter. The adjustment is due to the revised final data on non-farm payroll job count by the state Department of Labor and Industrial Relations.
DBEDT expects that the unemployment rate will be at 2.9% in 2017 and will gradually increase to 3.4% by 2020.
DBEDT kept the nominal personal income growth rates unchanged from the previous quarter forecast in the neighborhood of 4.7 and 4.8%.
DBEDT increased its projection for the consumer inflation rates for 2017 to 2.5%, higher than the 2.4% projected in February this year, but lowered its inflation projection slightly for the outer years. This change is mainly based on the most recent revised inflation projections made for the US by the 50 economic projection organizations. Honolulu consumer inflation rates have been above the US average inflation rates since 2004, with the exception of 2014 when Honolulu consumer inflation rate was lower than the US rate.
The DBEDT Quarterly Statistical and Economic Report contains more than 120 tables of the most recent quarterly data on Hawaiʻi’s economy as well as narrative explanations of the trends in these data.