Hawaii will host a record 7.8 million tourists this year, leading to 2.2 percent growth in the state’s economy, according to a recalibrated government forecast released Wednesday.
The state Department of Business, Economic Development and Tourism revised upward its forecast for tourist arrivals and spending, as well as overall economic growth for 2012 and 2013.
"We remain optimistic and confident that our economy is moving toward a more normal growth curve," said Richard Lim, DBEDT director.
Gross domestic product, the broadest measure of the state’s economic performance, is forecast to expand by 2.2 percent this year and 2.3 percent in 2013 after adjusting for inflation. Those figures were revised up from growth rates of 1.8 percent and 2 percent published in the state’s previous forecast in February.
While 2.2 percent growth may not be cause for grand celebration, it is an improvement on the state’s anemic 1.2 percent economic growth in each of the past two years.
Tourism will continue to be the main engine for growth, but the construction industry is showing some signs of life.
"A 46.2 percent increase in building permit values during the first quarter … should translate to new strength in the construction industry," Lim said.
Building permits rose 15.3 percent in the fourth quarter, giving Hawaii its first back-to back quarterly increases in building permits since 2006. Building permits are a precursor of future construction activity.
Tourist arrivals are expected to hit a record 7.8 million this year, up 6.5 percent from 2011. DBEDT had previously forecast a 4.4 percent annual increase. Visitor spending is expected to grow by 9 percent to $13.9 billion, another record. DBEDT in February forecast a 6.4 percent increase in spending.
A separate report on airline flights to Hawaii released recently forecast an 8.9 percent increase in the number of air seats to the islands in 2012 over 2011. A significant part of that will be provided by Hawaiian Airlines, which has been adding routes and increasing the frequency of flights in recent months.
Hawaiian said on Wednesday it will add a fourth route to its Japan map with flights three times a week between Sapporo and Honolulu, beginning Nov. 1.
"We anticipate our airlift (number of seats flown) in 2012 to increase by 279,000 seats," said Ann Botticelli, Hawaiian’s senior vice president for corporate communications and public affairs. "That will help the visitor number, for sure."
Less encouraging was DBEDT’s prediction that the pace of job growth will remain below the long-term trend. DBEDT is forecasting job growth of 1.5 percent in 2012 and 1.7 percent in 2013, unchanged from its forecast three months ago.
The number of payroll jobs in Hawaii’s economy hit a cyclical peak of 625,000 in 2007 during the economic boom that preceeded the 2008-2009 recession. After falling to a low of 593,200 in 2010, the number of jobs has yet to return to pre-recession levels. That won’t happen until 2014 when the number of payroll jobs is projected to reach 628,200, the forecast said.
In addition, Hawaii’s seasonally adjusted unemployment rate remains high by historical standards. At 6.4 percent in March, the rate is only marginally lower than the 6.6 percent from the same month a year earlier. Hawaii’s unemployment rate averaged 2.7 percent a month in the year before the recession.
Personal income should grow this year but not by much, DBEDT said.
DBEDT expects inflation-adjusted personal income growth of 1.7 percent in 2012, up from the previous forecast of 1.2 percent growth.
One pitfall of stronger economic growth, however, is a pickup in inflation. The consumer price index for Honolulu is expected to average 3 percent in 2012, up from the 2.8 percent rate forecast in February, according to DBEDT.