STATE REMAINS OPTIMISTIC ON ECONOMIC GROWTH

News Release from DBEDT August 19, 2013

HONOLULU—In its third quarter 2013 economic report, the Department of Business, Economic Development & Tourism (DBEDT) forecasts a higher economic growth rate for 2013 than its previous projections made in May this year.

The current forecast for 2013 real gross domestic product for Hawaii is a 2.6 percent growth rate, higher than the 2.4 percent rate the forecast last quarter, due mainly to the lower inflation rate, the strong growth in the construction industry, and continued growth in tourism.

“We continue to be sanguine over the prospects for our economy as the State’s third quarter results have validated our previous forecasts of economic growth,” said DBEDT Director Richard C. Lim.

DBEDT expects the Honolulu Consumer Price Index (CPI), a proxy for inflation, to rise 1.9 percent in 2013 – 0.4 of a percentage point below the previous forecast. Honolulu’s consumer inflation rate was 1.8 percent during the first half of 2013, according to data released by the Bureau of Labor Statistics last week.

Following a very strong growth in visitor arrivals in 2012, DBEDT projects that overall visitor arrivals will increase by 4.3 percent for 2013, the same as its previous forecast. Total visitor spending is now projected to increase 5.3 percent in 2013, 0.3 percent below the previous forecast. This is primarily due to the decrease in Japanese visitor spending caused by the depreciation of the Japanese yen. The forecast for the growth of visitor days in 2013 decreased from 3.1 percent to 2.7 percent.

Real GDP growth in 2014 is now forecast to grow 2.4 percent, slightly higher than the previous forecast. Real personal income growth in 2014 is currently forecast to be 2.9 percent, same as the previous forecast. The civilian unemployment rate is projected to be 4.5 percent in 2014.

Lim noted that Hawaii’s economy during the first half of 2013 has been “healthy.”

Hawaii’s unemployment rate dropped to 4.9 percent during the first half of 2013 from 6.2 percent a year ago. The private sector added 9,600 jobs to their payroll, resulting in a 1.5 percent growth in total non-agriculture wage and salary jobs.

The construction sector gained the most jobs, adding 2,625 more jobs in the first half of 2013 than a year earlier, followed by jobs in the “other services” sector at 1,500 jobs and the health care sector at 1,325 jobs.

Transportation, warehouse and utilities gained 1,150 jobs while food services and drinking establishments added 1,000 jobs.

Federal civilian jobs marked the largest job loss at 800 during the first six months of 2013.

In the current forecast, Hawaii’s civilian unemployment rate is projected to decrease one percentage point from 5.8 percent in 2012 to 4.8 percent in 2013.

Due to the furloughs of Federal civilian workers, the current personal income growth in 2013 is now expected to grow at 4.5 percent – lower than the projection made in previous quarter.

The real personal income growth rate forecast in 2013, however, was unchanged at 2.6 percent due to the lower than expected inflation rate.

The value of private building permits increased 11.6 percent during the first half of 2013 from the same period a year ago, indicating that the construction workers will be busier in the months to come.

State general excise tax revenue, an indicator of current economic activities, gained 8.0 percent in the first six months of the year. Visitor spending increased 6.9 percent during the same period.

The forecast for 2014 visitor arrivals increased from 2.5 percent to 3.0 percent, due to the new flights by Hawaiian Air to Beijing expected to start in April 2014 and the shift to larger planes by Japan Airlines. Forecast for visitor spending in 2014 is increased 0.2 of a percentage point to 5.0 percent in the current forecast.

(dbedt.hawaii.gov/economic/qser/outlook-economy)

1/ Visitors who came to Hawaii by air or by cruise ship.
2/ DBEDT calculated using BEA estimate of nominal personal income deflated by U.S. Bureau of Labor Statistics Honolulu CPI-U.
3/ Absolute change from previous year.
Source: Hawaii State Department of Business, Economic Development & Tourism, August 15, 2013.

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