State economists are taking a slightly dimmer view of expected light growth in Hawaii’s economy this year through 2022 in a new report assessing recent local, national and global factors.
The state Department of Business, Economic Development and Tourism said in its latest quarterly forecast, released Friday, that it expects a slight decrease in visitor spending this year and that inflation should be a bit higher than previously expected.
Visitor spending is forecast to slip 0.2% this year. In May, DBEDT said it expected visitor spending to grow 1.1%. A 0.2% dip equates to $45 million from a roughly $17.7 billion total.
Inflation, an increase in the cost of goods and services, is forecast to grow 2% this year instead of the previously expected 1.7%.
DBEDT said in its report that the U.S. trade war with China has had an impact on consumer prices, while some of that impact was offset by lower oil prices.
Hawaii’s economy at its broadest level is expected to continue rather steady and slow growth.
“Economic growth remains stable despite increased uncertainty,” DBEDT said in a statement announcing the 182-page report.
Gross domestic product, a comprehensive measure of economic activity, rose 1.6% during the first quarter of this year, according to U.S. Bureau of Economic Analysis data cited by DBEDT. This represented the highest quarterly growth rate since the fourth quarter of 2017, DBEDT said.
However, DBEDT forecasts that Hawaii GDP for the whole year will rise only 1.1%, and that’s down from 1.2% the agency forecast in May.
The downward revision was made in consideration of factors that included a consensus of 50 economic forecast organizations earlier this month lowering their U.S. economy growth forecast, and a recent Treasury note yield inversion.
The yield inversion, in which typically higher-paying 10-year notes recently and briefly were paying lower returns than two-year notes, has been a leading indicator for U.S. economic recessions over the last 60 years.
DBEDT also mentioned that the value of Hawaii building permits issued this year through June decreased 13% from the same period last year. The report said this could indicate a future slowdown in construction activity, though the industry this year through June added 700 jobs compared with the same period last year.
In light of these factors, DBEDT also reduced its forecast for Hawaii GDP growth next year to 1.2% from 1.3% in its prior report.
Brighter spots in DBEDT’s new forecast included no change in Hawaii’s 3% expected unemployment rate this year, and a bigger expected increase in visitor arrivals this year: 3.5%, up from 2.6% as forecast in the May report. A 3.5% gain represents 350,000 more people and would put the total visitor count at a record 10.3 million.
The report said no early impact from recent city enforcement actions against illegal vacation rentals on Oahu has been apparent in visitor arrivals. DBEDT noted that for the first three weeks of this month, the number of passengers arriving in Honolulu was up 4% over the the same period last year.
Mike McCartney, DBEDT director, also noted in a statement that tax revenue collected by the state in the first seven months of this year — $4.4 billion — was 6.8% higher than the same period last year and represented a record total.
“Though we are facing increased uncertainties, we are pleased to see that our tax revenue growth is still strong,” he said.
