2st Quarter 2008

     In its latest quarterly economic report, the Department of Business, Economic Development & Tourism (DBEDT) expects moderate growth in Hawaii's economy in 2008 and 2009. Personal income, total wage and salary jobs, and state gross domestic product (GDP) are all forecast to grow, although the rates of growth have been lowered from the previous forecast. Visitor arrivals are expected to decrease in 2008, but will stabilize in 2009.

     The 2008 forecast for real (inflation-adjusted) personal income growth is estimated to be 0.8 percent, down from 1.6 percent in the previous forecast. For 2009, real personal income growth is projected to be 1.1 percent, a 0.8 of a percentage point decrease from the last forecast. These decreases in real income growth forecasts mainly reflect the revised lower nominal personal income forecasts in both 2008 and 2009.

     In 2008, the Honolulu Consumer Price Index (CPI) is expected to rise 4.2 percent, 0.2 of a percentage point higher than in the previous forecast. The projected CPI growth for 2009 is 3.3 percent, down 0.1 of a percentage point from the previous forecast.

     The Hawaii's real GDP is estimated to have increased 2.7 percent in 2007, unchanged from the previous estimate. Real GDP is projected to grow 2.3 percent and 2.2 percent, respectively, in 2008 and 2009, down 0.2 and 0.3 of a percentage point, respectively, from the previous forecast.

     The future outlook for Hawaii's economy will depend on the growth of the Mainland U.S. and Japanese economies. In response to a stream of weaker-than-expected economic data in recent months, continued weakness in the housing market, further signs of tightening credit conditions and continued problems in the financial market, the consensus forecast for the U.S. economic growth has dropped over the past month. According to the April 2008 Blue Chip Economic Consensus Forecasts, the real GDP growth for the U.S. is now expected to be 1.4 percent in 2008, down 0.1 of a percentage point from the forecast in March 2008. The forecast of 2009 real GDP growth also dipped 0.1 of a percentage point to 2.2 percent. For Japan, real GDP growth is projected to be 1.3 percent in 2008 and 1.7 percent in 2009. The 2008 real GDP growth forecast is the same as the previous forecast but the 2009 forecast is 0.2 of a percentage point lower than the previous forecast. The latest forecast for U.S. consumer price inflation is 3.5 percent for 2008 and 2.4 percent for 2009.

     Based on the data through the first quarter of 2008 and the outlook in coming months, total visitor arrivals are now expected to decline 3.0 percent in 2008, in contrast to a 1.4 percent decrease in the last forecast. Visitor days are now expected to decrease 2.4 percent in 2008, as compared to 1.5 percent decrease projected earlier. The 2008 forecast for total nominal (current dollar) visitor expenditures growth is revised from 1.5 percent in the previous forecast to 0.5 percent. For 2009, both visitor arrivals and visitor days are predicted to remain the same as in 2008, while the visitor expenditures are forecast to increase 3.6 percent from 2008.

     Construction continued to show robust, though slower, job growth. Despite decreases in total values of new private building authorizations in 2007, permit levels still remain high in terms of dollar values, suggesting a solid construction activity in coming months. With housing prices stabilizing in Oahu and Maui and inventories improving due to declines in sales, Hawaii's housing market is expected to be more favorable to buyers in coming months.

     Government construction has continued to grow. The ongoing multi-billion dollar military housing privatization initiative will also contribute to positive growth in Hawaii's construction industry in the coming years.

     In response to moderation in job and labor force growth in the latest quarter and the impacts of the sudden reduction in airline seats in April, total wage and salary jobs are now expected to grow 0.4 percent in 2008. The 2009 forecast for job growth is also decreased to 0.8 percent.