Economists raise outlook for isles’ growth

The state’s top economists nudged up expectations for Hawaii’s growth for the year, due to improved performance in the tourism industry.

In its second-quarter forecast for 2017, the state Department of Business, Economic Development and Tourism said Wednesday it revised its growth forecast for real, or inflation-adjusted, gross domestic product this year to 1.9 percent, up from the 1.8 percent projection it made in its previous report in February. GDP — the total output of goods and services in the state — is the broadest measure of economic output.

DBEDT Chief Economist Eugene Tian said additional routes bringing more visitors to the islands are the primary cause for the revision.

“There will be a few new routes added from the U.S. mainland to the neighbor islands this year,” he said. “At the beginning of the year, airline schedules indicated that we would have 0.5 percent decline in air seats this year. But by March this year, updated airline schedules indicated that there would be a 1.3 percent gain in air seats for 2017.”

During the first quarter, visitor arrivals increased 3.1 percent and visitor expenditures increased 10.4 percent.

The first-quarter numbers pushed up DBEDT’s expectations for annual growth. Visitor spending in 2017 was revised to grow 5.1 percent from 2016 to $16.55 billion, up from the forecast of 2.9 percent growth to $16.21 billion in the initial report. Visitor arrivals are expected to grow 2 percent in 2017 — the initial report said they would grow 1.5 percent — to more than 9 million visitors.

“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,” said DBEDT Director Luis P. Salaveria in a statement.

Hawaii’s construction industry contributed to strong growth in the state’s real GDP last year, according to a report released last week by the U.S. Bureau of Economic Analysis. The report said Hawaii’s annual real GDP grew 2.1 percent in 2016.

The construction industry continued its healthy performance during the first quarter of 2017. Private building permits increased in value during the quarter by 66.3 percent; residential permit value increased 126.8 percent; commercial and industrial permit value increased 203.2 percent; and the value of additions and alterations increased 6.1 percent.

Hawaii’s economy also saw improvement in labor force and employment data during the first three months of the year.

“It’s encouraging to see our first-quarter numbers, which signals our economy is on solid footing,” Salaveria said.

Setting a record, Hawaii had 695,650 people in the labor force and 676,400 people employed in the first quarter. Hawaii’s unemployment rate was 2.7 percent in March.

DBEDT said it expects the unemployment rate will increase to 2.9 percent in 2017 and 3.4 percent by 2020.

Personal income growth rates are expected to grow by about 4.7 percent in 2017.