4th Quarter 2009

       Based on the most recent data available, the Department of Business, Economic Development & Tourism (DBEDT) has revised its forecasts for some of Hawaii's economic variables in 2009. The revised forecast for total visitor arrivals is improved and the revised forecast for total visitor expenditures is slightly lower compared with the previous forecasts. The forecasts for personal income and jobs were both revised lower. Hawaii's economy is expected to see some improvement in 2010 and modest growth by 2011.

       The outlook for Hawaii's economy depends significantly on growth in the U.S. economy and key international economies, especially Japan. In response to slightly better-than-expected economic data in recent months, the consensus forecast for U.S. economic growth has become more optimistic. According to the November 2009 Blue Chip Economic Consensus Forecasts, U.S. real GDP is expected to decline by 2.4 percent in 2009 as a whole. A quarterly breakdown of the forecast shows gradually smaller declines in real GDP since the third quarter of 2009, compared to the August 2009 forecast (now pegged at -2.3, and -0.3 percent, respectively, for the last two quarters of 2009). The consensus forecast for 2010 now predicts a 2.7 percent growth in U.S. real GDP.

       For Japan, real GDP growth is now projected to decline 5.8 percent in 2009, compared to the 6.2 percent decrease for 2009 in the August consensus forecast. A modest 1.5 percent growth rate is currently expected for Japan in 2010.

       Visitor arrivals are now expected to decrease 4.5 percent for 2009 as a whole, compared with the forecasted 5.9 percent decline in the previous QSER. The last quarter of the year is expected to remain the same from the same quarter last year as compared to the large decrease in the first three quarters of 2009 (-5.8%). The visitor industry has stabilized at the lower level that began in April 2008. Visitor days are expected to decline 4.6 percent, compared with the 5.8 percent decrease expected in the previous forecast. The forecast for visitor expenditure growth in 2009 is revised downward to negative 12.6 percent from a decrease of 11.5 percent in the previous forecast.

       Visitor arrivals and visitor days are expected to achieve modest gains in 2010 of 2.0 percent and 0.7 percent, respectively. Visitor expenditures are forecast to remain about the same in 2010.

       Total wage and salary jobs in Hawaii are now expected to decline 3.3 percent in 2009 instead of the 3.0 percent decline previously projected. In 2010 jobs is projected to decrease 0.9 percent.

       Personal income growth in current dollars will likely show a modest decrease of 0.8 percent in 2009, due largely to significant decreases in Wage and Salary Disbursements and Dividends, Interest, and Rent. Combined with a slightly lower projected inflation rate resulted in a 0.9 percent decrease in real personal income forecast for the year. In 2010, current dollar personal income is forecast to increase 1.5 percent. In real terms, however, personal income is expected to show no growth in 2010, after the effects of inflation are subtracted.

       The Honolulu Consumer Price Index (CPI), which increased 4.3 last year, is now expected to increase only 0.1 percent in 2009. In 2010, the CPI is projected to increase 1.5 percent.

       Major indicators of construction activity in 2008 and the first three quarters of 2009 suggest slower construction activities in Hawaii in the near future. Increases in the value of government contracts awarded in 2008 were more than countered by declines in the value of private building authorizations.

       Overall, Hawaii's real GDP is projected to decrease 1.1 percent in 2009, unchanged from the previous forecast. Real GDP is now expected to manage 0.8 percent growth in 2010, slightly higher than the 0.4 percent growth projected in the previous QSER.

       Beyond 2010 the gradual recovery is expected to continue with modest job growth of around 0.8 percent for 2011. Visitor arrivals should show a healthier, 4.1 percent increase in 2011. Hawaii's real GDP growth in 2011 is expected to reach 1.3 percent. This gradual recovery will continue into 2012, assuming national and international economic conditions continue to improve.