University of Hawaii economists sour on state’s growth

University of Hawaii economists have become pessimistic about the state’s slowing growth and are lowering their expectations amid increased risks in the U.S. and abroad.

Their forecast for the state’s gross domestic product — the broadest measure of the economy — was scaled back, as were numbers for visitor arrivals by air, nonfarm payrolls and inflation- adjusted personal income in a report scheduled to be released today by the University of Hawaii Economic Research Organization.

UHERO also expects housing in Honolulu to flatten out with the median price for single-family homes and condominiums to mostly rise by low single digits over the next three years.

The local economists have changed their outlook from modest growth to a more downbeat view of the economy’s prospects.

“Our more pessimistic outlook reflects both a clearer view of slowing in Hawaii as additional data has come in, as well as emerging negative indicators of conditions in the U.S. and abroad,” the report said. “Our numerical forecasts are only marginally weaker than in our fourth-quarter outlook, reflecting our view that some recovery is likely in areas where we saw particular weakness in the second half of last year. But the configuration of risks is now tilted decidedly downward. Fasten your seatbelts please.”

Those risks, UHERO said, include slowing economies in China and Germany, uncertainty over Brexit that raises the prospect of a European-wide recession, contracting retail sales in the United States and other weak U.S. economic data.

UHERO said Hawaii’s economy ended 2018 on a poorer footing than 2017 and across a number of areas saw a flattening out or outright decline in activity.

“Tourism challenges were not limited to the aftermath of flood and fire, but also reflected weakening in some key markets and a falloff in spending,” UHERO said. “At home, population growth has been negative for the past two years, weighing on demand. Deceleration is now well established in the islands, posing significant downside risks to our forecast of continuing modest growth.”

UHERO now expects inflation-adjusted GDP (the production of all goods and services) to increase 1 percent this year instead of the 1.3 percent rise it forecast in its fourth-quarter report in December.

Visitor arrivals, which the economists note have been essentially flat since April on a seasonally adjusted basis, are now projected to increase just 1.7 percent this year, down from the UHERO forecast of 2.5 percent less than three months ago.

“While the annual number of visitors reached a new rec­ord in 2018, the health of the industry has become more tenuous,” UHERO said. “Given U.S. and global conditions, we expect only modest growth in 2019 and slowing thereafter. Arrivals will expand by just 1-2 percent for the next two years, easing to sub-1 percent rates by 2021. With demand soft, real (inflation-adjusted) visitor spending growth will edge up only marginally.”

UHERO said, though, that the planned entry of Southwest Airlines to the Hawaii market could potentially increase travelers coming to the state from the mainland.

The research organization also lowered its forecast for payrolls to an increase of 0.6 percent, down from 0.7 percent; and for inflation-adjusted personal income to 1.1 percent, down from 1.2 percent. UHERO projected inflation this year to be 2 percent compared with 2.1 percent in its earlier forecast, and maintained its projection for the unemployment rate at 2.5 percent.

The economists see housing prices barely rising. They project the median price for single-family homes to edge up just 2.1 percent this year to $804,000, 2.3 percent in 2020 to $822,600 and 1.4 percent in 2021 to $834,100. The median price for condos is projected to end this year up 3.2 percent at $432,800, rise 5.6 percent in 2020 to $456,900 and increase 2.2 percent in 2021 to $467,100.

ON THE MOVE

Bank of Hawaii has announced the following promotions:

>> Natalie Fogle to senior vice president and senior construction and project manager from vice president and construction and project manager of its Corporate Real Estate and Facilities Division. Fogle joined the bank in 2010 with experience in the architectural industry since 1999 — she had owned her own firm in San Francisco — and was promoted to vice president at the bank in 2014.

>> Andrea G. McCarley to senior vice president from director of enterprise application management. McCarley joined the bank in 2016.

>> Vance H. Jones to executive vice president from chief information security officer.

Hawaiian Properties has hired Michael Gordon as a vice president and senior property manager. His more than 25 years’ experience in community association management, including as senior community association manager for Kappes Miller Management in Seattle, Hawaiiana Management and assistant vice president at Chaney, Brooks & Co.