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Spending rise an encouraging economic sign

Credit and debit card sales increased 8.69 percent last year, an indication of consumer confidence

In a sign that consumer spending is gaining speed, credit and debit card sales at businesses open at least a year jumped 8.69 percent in 2011, according to a business activity report due out today by First Hawaiian Bank, the state’s largest local card processor of merchant services.

The economy will do better with consumers willing to open their wallets a bit wider, but it’s not the whole story. “The report is a good look at one slice of the economy,” First Hawaiian President and CEO Bob Harrison said. “Consumer confidence is a huge driver of the economy, but there are bigger forces at work. We still haven’t seen the construction sector come back.”

Credit card spending grew by 10.2 percent in the first quarter of 2011, slowed to 8 percent in the second quarter and 7.5 percent in the third quarter before picking up to 8.9 percent in the fourth. Hawaii merchants rang up $683.7 million in card sales in the final three months of last year to bring their total for the year to $2.7 billion. In 2010 card spending was $2.5 billion.

Convenience stores had the largest percentage year-over-year increase in 2011 at 17.4 percent. Other doubledigit percentage gainers were utilities and communications, 15.8 percent; shipping, 12.3 percent; hotels, 11.4 percent; automotive parts, services and accessories, 11 percent; and travel activities, 10.5 percent.

Hotels, as expected, had the largest transaction volume at $636.2 million. Restaurants were next at $391 million, followed closely by retail at $309.8 million.

“If you look at the entire year, it’s very broad-based,” Harrison said. “You’re seeing the highest numbers in convenience stores, utilities, shipping, automotive parts, travel activities — all of those are over 10 percent. That’s good, solid growth on a broad spectrum of what people have available to them. People are getting a little looser with discretionary spending as well.”

For the fourth quarter, utilities-communications led the way with a 17.8 percent increase, followed by convenience stores, up 15.7 percent, and supermarkets, up 12.6 percent. Hotels and restaurants had the largest transaction volumes at $153.4 million and $104.8 million, respectively.

The report doesn’t include the lagging construction sector since credit and debit cards aren’t typically used in that industry.

“This report is definitely encouraging, but the piece we haven’t seen much broad-based improvement in yet is construction activity,” Harrison said. “If you put that together with this, you’ll really start seeing the economy moving in the right direction.”

Likewise, First Hawaiian Bank economics adviser Leroy Laney said he wouldn’t get too excited just yet.

“I wouldn’t read too much into one quarter’s number because you have to pick up some kind of a trend,” he said. “The first three quarters did show somewhat of a slowdown, and that’s been consistent with what most forecasters around the state have been saying, but 8.9 percent in the fourth quarter is encouraging.”

Laney said the full-year double-digit gain for hotel spending is “healthy” and indicative of a rebound in tourism, which he calls “one of the leading edges of economic strength.”

“Overall I think it’s a healthy economy,” he said. “We had marginal increases through the first three quarters and somewhat of a turnaround in the fourth quarter. We’ll have to see how that plays out as we go into 2012. Some of that fourth-quarter increase could have been year-end holiday surges, the beginning of winter tourism, various things like that.”

First Hawaiian’s report is supported by a 15.1 percent increase in visitor spending to $11.3 billion through the first 11 months of the year, according to recent data from the Hawaii Tourism Authority. Since visitors spend roughly $1 billion a month, the full-year total for 2011 could finish near the all-time visitor spending record of $12.8 billion in 2007.

State economists have been projecting slow growth for the economy in 2012 with Laney and the University of Hawaii Economic Research Organization both projecting just a 0.9 percent increase in inflation-adjusted personal income, and the state Department of Business Economic Development and Tourism forecasting personal income to rise 1.2 percent.

First Hawaiian, the largest bank in the state with assets of $15.4 billion, has more than 7,500 merchant locations throughout Hawaii, the mainland, Guam and the Commonwealth of the Northern Mariana Islands.

Overall, the bank processed $4.1 billion worth of card transactions in 2011, including businesses open less than a year. That’s up 8 percent from $3.8 billion in 2010. The report, though, focused solely on Hawaii.

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