Construction lifted state GDP in 2016

Hawaii’s construction industry contributed to strong growth in the state’s real gross domestic product for 2016, despite pulling it down in the four quarter.

Hawaii’s annual GDP — the total output of goods and services in the state — grew 2.1 percent in 2016, according to a report released Thursday by the U.S. Bureau of Economic Analysis. The GDP is the broadest measure of economic output.

“Hawaii had a pretty strong 2016,” said Sumner La Croix, research fellow at the University of Hawaii Economic Research Organization. La Croix said the healthy year was “driven by construction spending.”

The state did much better than the national average, ranking ninth among the 50 states and the District of Columbia in highest annual gain in GDP.

“Construction jobs and construction spending last year were strong,” said Carl Bonham, executive director of the University of Hawaii Economic Research Organization, noting the industry contributed almost half of a percentage point to the 2.1 percent growth in GDP for the year.

Hawaii’s GDP was weaker in the fourth quarter, pulled down by the industry that boosted its annual growth.

The state saw a rise of real GDP by 0.9 percent in the fourth quarter of 2016, ranking 41st among states. The quarterly rate is annualized, meaning if Hawaii’s economic growth stays on the same pace for the next three quarters, the 12-month growth rate would be 0.9 percent.

“We’re seeing a little bit of that weakness that we thought was coming in the fourth quarter,” La Croix said.

The University of Hawaii Economic Research Organization lowered its 2017 forecast for the state’s inflation- adjusted gross domestic product to 1.4 percent — down from 2 per-cent in its March report.

The slower growth in the fourth quarter was due to declines in construction and real estate, La Croix said.

“A lot of Hawaii’s growth ups and downs tend to be related to construction,” he said.

Bonham said slower construction activity in the fourth quarter was due to big projects wrapping up.

Real estate sales also slowed in the fourth quarter.

La Croix said Hawaii has seen a weakness in the real estate market among luxury and high-end homes.

“There has been a softening real estate market,” he said.

Bonham said he believes tourism will play a stronger role in the 2017 GDP.

“We think this year more of the growth will come out of hospitality and tourism and less out of construction,” Bonham said.

Bonham said one major factor contributing to hospitality’s role in GDP is the state being able to accommodate additional visitors, as more places for them to stay become available.

“We’re adding some conditional capacity in terms of timeshares and renovated properties coming back online,” he said. “We could see stronger visitor growth than we’re expecting.”

Still, Bonham said he expects growth will continue in 2017.

“I don’t think there were any big surprises here. … Hopefully we continue like that for a while.”