Accelerated Economic Growth Forecast in 2018
Hawaiʻi’s economy started to accelerate during the first quarter of 2018 and the economic growth in 2018 will be better than previously projected, according to the recently released second quarter 2018 Statistical and Economic Report compiled by the state Department of Business, Economic Development and Tourism.
The accelerated projection is due to the strong performance of tourism and the continued improvement in the labor market, department officials said.
During the first quarter of 2018, Hawaiʻi continued to be the best labor market in the nation with an unemployment rate at 2%, which was the lowest in the nation and the lowest rate in Hawaiʻi’s history.
Statewide employment, the number of people who are either employed for pay or self-employed, was at a record high during the first quarter of 2018. Non-agriculture payroll jobs increased by 8,800 during the same period. Visitor arrivals registered the best quarter during the first quarter of 2018 with 2.4 million visitors coming to Hawaiʻi by airplanes. The corresponding nominal visitor expenditures increased 10.1% during the first quarter of 2018.
Total number of air seats on scheduled flights to Hawaiʻi, a leading indicator of the tourism industry, increased 10.6% during the first quarter of 2018 and is expected to increase by 7.4% during the rest of 2018.
“Tourism, professional services, and the healthcare industries continue to be the drivers of our economic growth,” said DBEDT Director Luis P. Salaveria. “These three industry sectors added more than 10,000 jobs during the first quarter of 2018.”
The report also shows industries which had challenges in job growth. For example, state government lost 1,700 jobs, and the retail trade lost 1,000 jobs during the first quarter of 2018, as compared with the numbers a year earlier. The loss of jobs in state government may be attributed to the difficulties filling vacant positions with the limited labor supply in the state.
Statistics for construction were mixed during the first quarter of 2018. The value of statewide private building permits decreased 23.9% with most of the decrease occurring in Honolulu County with a 37.2% decrease during the first quarter of 2018. Honolulu accounted for 56.3% of the total statewide private construction value.
Maui County also saw decreases in private building permits value at 9.2%, while private building permit values for Hawaiʻi and Kauaʻi counties increased at 15.1% and 28.7%, respectively.
“The real estate market continued performing well during the first four months of 2018. Both sales and median prices of homes increased for all the counties during the first four months of 2018 with the exception on the median condo price on Kauaʻi, which decreased by 1.8%,” said Chief State Economist Dr. Eugene Tian.
“On Oʻahu, the median price for single family homes increased 4.6% and the median price for condos increased by 7.5% during the first four months of 2018. Investment in residential real estate by out-of-state residents is still strong. During the first quarter of 2018, 28.1% of the homes were sold to out-of-state residents, the highest increase since the second quarter of 2012,” said Dr. Tian.
The most recent economic forecasts by more than 50 top economic research organizations (the Blue Chip Economic Indicators), released on May 10, reported that the US and the world economies will experience steady growth in 2018 and 2019, and the US economy will experience accelerated growth at 2.8% in 2018. Hawaiʻi will benefit from the accelerated US economic growth since more than 61% of Hawaiʻi’s visitor spending were derived from US mainland visitors. The US economy will continue to grow at 2.6% in 2019, according the consensus forecast.
DBEDT revised the visitor industry forecast upward with visitor arrivals now growing at 6% for 2018, 1.2% for 2019 and 1.4% for 2020 and 2021. Growth of visitor expenditures will be at 8.6% for 2018, 2% for 2019, and 3.5% for 2020 and 2021.
DBEDT revised its projection for Hawaiʻi’s economic growth, as measured by the real gross domestic product (GDP), upward from the first quarter 2018 projection to 1.9% for 2018, 1.6% for 2019, and 1.4% for 2020 and 2021.
DBEDT revised its projection on the non-farm payroll job count upward to 1.2% in 2018, 0.9% for 2019 and 2020, 0.8% for 2021. The unemployment rate projection now is lower for 2018 at 2.2% and will gradually increase to 3.4% by 2021.
DBEDT revised the nominal personal income growth rates upward from the previous quarter forecast to 4% for 2018, 3.9% for 2019, 4% for 2020 and 2021. DBEDT expects consumer inflation, as measured by the Honolulu Consumer Price Index, will be higher than previously projected, now at 2.6% for 2018, and will gradually increase to 3.1% by 2021. Growth of real personal income was also revised upward from the previous quarter forecast and is now 1.7% for 2018, and will be between 1.2% and 1.5% for the next few years.