3rd Quarter 2009

       Based on sharper declines now forecast for the visitor expenditures in the 2009, the Department of Business, Economic Development & Tourism (DBEDT) has lowered its forecasts for some of Hawaii's economic variables in 2009. Due to reduced inflation forecast; however, the forecasts of real personal income and real GDP are now slightly increased. 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 better-than-expected economic data in recent months, the consensus forecast for U.S. economic growth has become more optimistic. According to the August 2009 Blue Chip Economic Consensus Forecasts, U.S. real GDP is expected to decline by 2.6 percent in 2009 as a whole. A quarterly breakdown of the forecast shows gradually smaller declines in real GDP since the second quarter of 2009, compared to the May 2009 forecast (now pegged at -3.9, -2.7, and -0.8 percent, respectively, for the last three quarters of 2009). The consensus forecast for 2010 now predicts a 2.3 percent growth in U.S. real GDP.

       For Japan, real GDP growth is now projected to decline 6.2 percent in 2009. This represents an additional 0.3 percentage point of decline for 2009 than in the May consensus forecast for Japan. A modest 1.3 percent growth rate is currently expected for Japan in 2010.

       Visitor arrivals are expected to decrease 5.9 percent for 2009 as a whole, unchanged from the previous forecast. The last two quarters of the year are expected to decrease 1.2 percent as compared to the large decrease in the first two quarters of 2009 (-9.8%). The visitor industry has stabilized at the lower level that began in April 2008. Visitor days are expected to decline 5.8 percent, compared with the 3.4 percent decrease expected in the previous forecast. The forecast for total, current-dollar visitor expenditure growth in 2009 is revised downward to negative 11.5 percent from a lower decrease of 7.9 percent in the previous forecast.

       Visitor arrivals and visitor days are expected to achieve modest gains in 2010 of 1.2 percent and 0.7 percent, respectively. Visitor expenditures are forecast to increase 2.9 percent in 2010.

       Total wage and salary jobs in Hawaii are now expected to decline 3.0 percent in 2009 instead of the 2.1 percent decline previously projected. In 2010 jobs is projected to decrease 0.4 percent.

       Personal income growth in current dollars will likely show a modest gain of 1.0 percent in 2009, due largely to significant increases in government transfer payments. A slightly higher than projected inflation rate resulted in a 0.4 percent increase in real personal income for the year. In 2010, current dollar personal income is forecast to improve to about a 1.5 percent gain. 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 0.6 percent in 2009. In 2010, the CPI is projected to increase 1.5 percent.

       Major indicators of construction activity in 2008 and the first two 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, compared with the previous forecast of negative 1.6 percent growth. This adjustment is due to lower projected inflation. Real GDP is expected to manage 0.4 percent growth in 2010.

       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, 4.3 percent increase in 2011. Hawaii's real GDP growth in 2011 is expected to reach 1.5 percent. This gradual recovery will continue into 2012, assuming national and international economic conditions continue to improve.