Hawaii credit card receipts point to slowing economy

The growth in credit and debit card spending slowed in the third quarter, giving more credence to economists’ recent forecasts that Hawaii’s economic expansion is decelerating.

Credit and debit card sales at businesses open at least a year rose 7.5 percent to $702.8 million from $653.8 million in the year-ago period, according to a third-quarter business activity report released today by First Hawaiian Bank, the state’s largest local card processor of merchant services. The increase follows second-quarter growth of 8 percent and first-quarter growth of 10.2 percent.

"While we are encouraged by these continued healthy results, we are beginning to see a slowing of sales growth," said Keith Nagata, First Hawaiian senior vice president and business services division manager.

The bank breaks out spending among 16 industries, and found shipping to have the largest percentage increase at 18.1 percent. Other double-digit percentage gainers were utilities/communications, up 17.6 percent; convenience stores, up 17 percent; and automotive parts, services and accessories, up 12.4 percent.

Hotels had the largest transaction volume at $168.4 million, but credit and debit card spending at hotels increased just 7.4 percent over the third quarter of 2010 and showed only about half the increase from the 15.1 percent gain in the second quarter of this year. Restaurants had the second-largest transaction volume at $102.3 million, up 8.6 percent over the year-earlier period and roughly in line with the 8.2 percent gain in the second quarter of this year.

"A lot of the things that had been the strongest gainers by category were tourism related and that’s what’s slowing down," First Hawaiian economics adviser Leroy Laney said. "The tourism snapback from the 2008-2009 recession is slowing down because that can’t be sustained at the same rate. I think we will continue to see a leveling off."

While the report showed year-over-year percentage gains in 14 of the 16 sectors it tracks, it doesn’t include the lagging construction sector since credit and debit cards aren’t typically used in that industry. Insurance, which slipped 0.1 percent in transaction volume to $9.5 million, and travel agencies, off 5.7 percent to $31.2 million, were the only sectors where spending decreased from the year-earlier period.

In September, the University of Hawaii Economic Research Organization revised lower its forecast for the state’s inflation-adjusted gross domestic product, the broadest measure of economic activity, to 1.7 percent from 2.6 percent in May.

In August, the state Department of Business, Economic Development & Tourism lowered its GDP forecast to 1.3 percent from 1.6 percent in May.

Laney is expected to be similarly downbeat when he issues his forecast on Nov. 17.

First Hawaiian, the largest bank in the state with assets of more than $15 billion, processed more than $3.8 billion worth of credit and debit card sales transactions in 2010. The bank has more than 7,500 merchant locations throughout Hawaii, Guam and the Commonwealth of the Northern Mariana Islands.