A surging visitor industry is largely credited for underpinning Hawaii’s modest economic growth so far this year.
But other sectors will need to bear some of the load if the economy is to return to full strength, according to a report from the University of Hawaii Economic Research Organization.
"Except for pockets of activity, many non-tourism sectors of the local economy continue to suffer. The tourism boom has yet to spill over," UHERO economists wrote in their quarterly forecast released today.
While the outlook for tourism has improved since UHERO’s last report in May, most other economic indicators were revised downward. UHERO economists are now looking for the state economy to grow by just 1.1 percent this year from 2011, half of the 2.2 percent growth rate forecast in May. The projection for 2013 was cut to 2.4 percent from 3.1 percent.
At the same time, UHERO economists revised upward their forecasts for visitor arrivals and spending. Their outlook was supported by a report from the Hawaii Tourism Authority released Thursday showing that both categories are on track to set records this year.
An increase in visitors from Canada and Australia has helped. And there is room for further growth in emerging markets, such as China, as visa restrictions are loosened, according to UHERO.
"But there is no doubt that a dramatic worsening of global conditions would cause a steep falloff in all tourism markets," the economists wrote in the report. "In any case, there is only so much tourism capacity, so gains on the scale of recent growth will not be sustained indefinitely."
In addition to cutting its growth forecast, UHERO also revised downward its estimates for payroll jobs, personal income and inflation.
ECONOMIC OUTLOOK
Year-over-year percentage changes through 2014:
| |
2011 |
2012 |
2013 |
2014 |
| Visitor arrivals |
3.5% |
9.3% |
3.0% |
1.2% |
| Payroll jobs |
0.9% |
1.3% |
2.4% |
2.2% |
| Unemployment rate* |
6.7% |
6.2% |
5.6% |
5.0% |
| Inflation rate |
3.7% |
3.0% |
2.5% |
2.9% |
| Personal income** |
0.9% |
1.4% |
2.1% |
2.5% |
| Gross domestic product** |
-1.5% |
1.1% |
2.4% |
3.1% |
*Percentage of workforce
**Adjusted for inflation
Note: Figures for 2012-2014 are forecasts.
Source: University of Hawaii Economic Research Organization
|
As usual, the outlook for Hawaii’s economy is partly dependent on outside factors, the UHERO economists noted.
"This time, on top of a weakening global environment, we face the unknown outcome of the fall elections, which have potentially far-reaching implications for government and the economy for years to come," according to the report.
"Already, the tenor of political debate and the great uncertainty about what may happen after November 6 are likely contributing to reticence on the part of U.S. households and businesses to commit to new spending."
Still, Hawaii remains in better shape than many U.S. states, according to the report. In addition to strength in tourism, Hawaii’s construction sector is poised to turn the corner. The limited inventory of unsold homes bodes well for residential building that exceeds the national average.
"We are cautiously optimistic that these factors will maintain gradually improving economic conditions in the islands," the report’s authors wrote.
