Outlook for the Economy

1st Quarter 2017 Report

Hawaii’s economy is expected to continue positive growth for 2017 and 2018. This outlook is based on the most recent developments in the national and global economies, the performance of Hawaii’s tourism industry, labor market conditions, and the growth of personal income and tax revenues.

Hawaii’s economy depends significantly on conditions in the U.S. economy and key international economies, especially Japan. According to the January 2017 Blue Chip Economic Consensus Forecasts, U.S. real GDP is expected to increase by 2.3 percent in 2017, 0.1 of a percentage point above the growth rate projected in the November 2016 forecast. For 2018 the consensus forecast predicts an overall 2.4 percent growth in U.S. real GDP.

According to the January 2017 Blue Chip Economic Consensus Forecast, real GDP growth for Japan is now expected to increase 1.0 percent in 2017; 0.2 of a percentage point higher than the growth rate projected in the November 2016 forecast. For 2018, the consensus forecast now expects an overall 0.7 percent growth rate for Japanese real GDP.

For the local economy, DBEDT expects that visitor expenditures will grow at a lower rate than projected in the previous forecast for 2017 and 2018. For GDP growth, the current forecast in 2017 was slightly lower than the previous forecast.

Overall, Hawaii’s economy, as measured by real GDP, is projected to show a 1.8 percent increase in 2017, 0.1 of a percentage point below the growth rate forecasted last quarter. The real GDP growth forecast in 2018 is 1.7 percent, also the same as the previous forecast.

Hawaii’s unemployment rate is projected to be 3.4 percent in 2017, the same as the previous forecast. The unemployment rate in 2018 is projected to be 3.5 percent, also the same as the previous forecast.

Visitor arrivals are expected to increase 1.5 percent in 2017, 0.3 of a percentage point below the previous forecast. The forecast for visitor days in 2017 decreased 0.6 of a percentage point to 1.4 percent. The forecast for visitor expenditure growth in 2017 was revised downward to 2.9 percent, from 4.0 percent growth projected in the previous forecast. For 2018, the growth rate of visitor arrivals, visitor days, and visitor expenditures are now expected to be 1.7 percent, 1.7 percent, and 4.0 percent, respectively.

The projection for the non-agricultural wage and salary job growth rate for 2017 is 1.2 percent, the same as the previous forecast. In 2018, jobs are projected to increase 1.1 percent, also the same as the previous forecast.

The Honolulu Consumer Price Index (CPI) is now expected to increase 2.4 percent in 2017, 0.2 of a percentage point below the previous forecast. In 2018, the CPI is projected to increase 2.5 percent, 0.3 of a percentage point below the previous forecast.

Personal income in current dollars is now expected to increase 4.7 percent in 2017, the same as the previous forecast. Real personal income is now projected to grow 2.4 percent in 2017, 0.2 of a percentage point below the previous forecast. In 2018, current-dollar personal income and real personal income are expected to increase 4.7 percent and 2.3 percent, respectively.

Beyond 2018, the economy is expected to continue its expansion path, with job growth projected to be 1.1 percent in 2019 and 2020. Visitor arrivals are expected to increase 1.6 percent in both 2019 and 2020. Visitor expenditures are expected to increase 3.7 percent in 2019 and 2020. Real personal income is projected to increase 2.5 percent in 2019 and 2.6 percent in 2020. Hawaii’s real GDP growth is expected to increase 1.6 percent in 2019 and 2020. The unemployment rate is expected to increase to 3.6 percent in 2019 and 2020.

ACTUAL AND FORECAST OF KEY ECONOMIC INDICATORS FOR HAWAII: 2015 TO 2020

Economic Indicators 2015 2016 2017 2018 2019 2020
Actual Forecast
Total population (thousands) 1,425 1,429 1,436 1,447 1,459 1,470
Visitor arrivals (thousands) ¹ 8,680 8,941 9,080 9,235 9,383 9,536
Visitor days (thousands) ¹ 78,620 80,383 81,508 82,907 84,252 85,642
Visitor expenditures (million dollars) ¹ 15,111 15,748 16,207 16,847 17,475 18,129
Honolulu CPI-U (1982-84=100) 260.2 265.3 271.6 278.4 285.1 291.7
Personal income (million dollars) ² 69,129 72,304 75,702 79,260 83,064 87,052
Real personal income (millions of 2009$) ³ 53,830 55,284 56,610 57,912 59,360 60,904
Non-agricultural wage & salary jobs (thousands) 636.9 650.9 658.7 665.9 673.3 680.7
Civilian unemployment rate 4 3.6 3.2 3.4 3.5 3.6 3.6
Gross domestic product (million dollars) 5 80,376 83,671 86,767 90,151 93,667 97,320
Real gross domestic product (millions of 2009$) 5 71,501 72,931 74,244 75,506 76,714 77,941
Gross domestic product deflator (2009=100) 5 112.4 114.7 116.9 119.4 122.1 124.9
Annual Percentage Change
Total population 0.6 0.2 0.5 0.8 0.8 0.8
Visitor arrivals ¹ 4.3 3.0 1.5 1.7 1.6 1.6
Visitor days ¹ 3.5 2.2 1.4 1.7 1.6 1.6
Visitor expenditures ¹ 0.9 4.2 2.9 4.0 3.7 3.7
Honolulu CPI-U 1.0 2.0 2.4 2.5 2.4 2.3
Personal income ² 4.8 4.6 4.7 4.7 4.8 4.8
Real personal income ³ 3.8 2.7 2.4 2.3 2.5 2.6
Non-agricultural wage & salary jobs 1.5 2.2 1.2 1.1 1.1 1.1
Civilian unemployment rate 4 -0.8 -0.4 0.2 0.1 0.1 0.0
Gross domestic product 5 4.9 4.1 3.7 3.9 3.9 3.9
Real gross domestic product 5 2.3 2.0 1.8 1.7 1.6 1.6
Gross domestic product deflator (2009=100) 5 2.6 2.1 1.9 2.2 2.3 2.3

1/ Visitors who came to Hawaii by air or by cruise ship. Expenditures includes supplementary expenditures. 2016 supplementary expenditure was estimated by DBEDT.
2/ The 2016 values are estimated based on actual values in the first three quarters of 2016.
3/ Using personal income deflator developed by the U.S. Bureau of Economic Analysis and estimated by DBEDT.
4/ Absolute change from previous year.
5/ 2016 and later years are estimated by DBEDT, data for earlier years from U.S. Bureau of Economic Analysis.
Source: Hawaii State Department of Business, Economic Development & Tourism, February 6, 2017.