The Hawaii economy keeps growing, but not as fast as it did coming out of the Great Recession.
In a sign that the state continues moving in the right direction, local businesses saw credit and debit card transactions increase 5.9 percent in the third quarter from the year-earlier period, according to First Hawaiian Bank’s quarterly business activity report due out today.
But the pace of growth is slowing, as is evidenced by state tourism numbers released in September that show visitor arrivals and spending through the first eight months of the year were both up 5.1 percent. That’s below the Hawaii Tourism Authority’s full-year projections of 6 percent for arrivals and 6.9 percent for spending made in August.
A prolonged government shutdown could slow the growth even further, according to Jack Suyderhoud, a First Hawaiian Bank adviser and professor of business economics at the University of Hawaii Shidler College of Business.
"The longer the shutdown lasts, the larger the impact will be," Suyderhoud said. "There’s no doubt about the fact that it will have some impact. It’s just that we don’t know what the impact will be because we don’t know how long it’s going to last and we don’t know the extent of the shutdown."
Barring a lengthy shutdown, the state economy is in good shape, according to First Hawaiian President and CEO Bob Harrison.
"Although this quarter’s gain (in card transactions) was modest compared to previous quarters, what we are seeing is that this third quarter is the 15th consecutive quarter of positive growth," he said. "That is a good indication for us that the economy continues to make steady gains."
First Hawaiian, the largest bank in Hawaii with $16.6 billion in assets, is able to track the economic pulse of the state through its card processing services. The bank is the largest local processor of debit and credit card transactions in the state. It has nearly 7,000 merchants on its network, with most of those in Hawaii.
The $759.8 million in card transactions processed by First Hawaiian’s local merchants during the third quarter was the most during the July-to-September period since the bank began issuing its quarterly study in 2010.
As the economy strengthens, the percentage increase in transactions over the previous year gets harder to maintain. The 5.9 percent increase in card transactions from visitors and kamaaina last quarter was the smallest in a third quarter since the inception of the report.
Suyderhoud said it’s no surprise that the momentum is slowing.
"Given the size of the increase of the last few years, we’re all expecting a deceleration," he said. "We’re not expecting a decline. It just means the speed of the advance is slowing down a little bit, and that’s to be expected given the trends we’ve had. It looks like we’re going to be in for a record year in terms of tourism counts if the train doesn’t come off the tracks the last couple of months."
Convenience stores and insurance were the only two sectors of the 16 tracked in the business activity report to show double-digit percentage gains in the third quarter. Transactions at convenience stores jumped 12.9 percent to $19.1 million from $16.9 million a year ago, while insurance transactions rose 11.4 percent to $11.3 million from $10.1 million.
Allen Uyeda, president and CEO of First Insurance Co. of Hawaii, said the evolution of technology has resulted in more people using debit and credit cards for insurance payments, "particularly for auto insurance."
"A lot of people’s transactions are being done over the Internet," Uyeda said, "and call centers are providing the capability for people to pay bills using credit and debit cards. It’s a convenience a lot of people like. Traditionally people would send in a check or take in cash, but with the whole evolution of the payment system, people are doing things more remotely."
Uyeda added, "We’ve seen a pretty significant improvement in the sales and payrolls of the companies that we insure. It probably started to turn around in late 2011 and got progressively stronger in 2012. It appears the economy is continuing on a very strong pace."
He said what drives the insurance industry and premiums is how well a company’s insured businesses are performing.
"When we insure a company, part of what we look at in terms of the potential loss is how much revenue they’re generating," he said. "If they generate more revenue, there’s more potential for lost revenue because the insurance would be based on the size of the business. If the business is larger, there’s more for the business to lose. If it has more employees, the cost of insurance is going to be higher just because there’s more exposure because they have more employees."
Hotel card transactions, which always produce the greatest card sales volume of the 16 sectors tracked, once again led the way at $145.8 million even though transactions rose just 7.1 percent from the year-earlier quarter. Restaurants were the only other sector with more than $100 million in transactions at $117.6 million, up 6.1 percent from the third quarter of 2012.
