Outlook for the Economy

2nd Quarter 2015

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 is expected to continue positive growth for the rest of 2015 and into 2016. While projected job growth is still positive, the current DBEDT forecast is less optimistic compared with the previous forecast.

Hawaii’s economy depends significantly on conditions in the U.S. economy and key international economies, especially Japan. According to the May 2015 Blue Chip Economic Consensus Forecasts, U.S. real GDP is expected to increase by 2.5 percent in 2015 as a whole, 0.7 of a percentage point lower than the 3.2 percent growth rate projected in the February 2015 forecast. For 2016 the consensus forecast now expects an overall 2.8 percent growth in U.S. real GDP.

According to the May 2015 Blue Chip Economic Consensus Forecast, real GDP growth for Japan is now expected to increase 1.0 percent in 2015, the same growth rate as projected in the February 2015 forecast. For 2016, the consensus forecast now expects an overall 1.5 percent growth rate for Japanese real GDP.

For the local economy, DBEDT expects most of the economic indicators will grow at slower rates than projected in the previous forecast.

Overall, Hawaii’s economy, as measured by real GDP, is projected to show a 2.5 percent increase in 2015, 0.6 of a percentage point below the growth rate forecasted last quarter. Real GDP growth in 2016 is expected at 2.4 percent, 0.6 of a percentage point below the growth rate forecasted last quarter.

Hawaii’s unemployment rate is projected to be 3.9 percent in 2015 and 3.6 percent in 2016, both are the same as the previous forecast.

Visitor arrivals are expected to increase 2.5 percent in 2015, 0.4 of a percentage point higher than the previous forecast. The forecast for visitor days in 2015 increased 0.4 of a percentage point to 2.7 percent. The forecast for visitor expenditure in 2015 was revised downward to 2.0 percent, from 3.4 percent growth projected in the previous forecast. For 2016, the growth rate of visitor arrivals, visitor days, and visitor expenditures are now expected to be 1.8 percent, 1.7 percent, and 4.6 percent, respectively.

The projection for the non-agricultural wage and salary job growth rate in 2015 is 1.1 percent, 0.4 of a percentage point below the previous forecast. In 2016, jobs are projected to increase 1.2 percent, 0.2 of a percentage point below previous forecast.

The Honolulu Consumer Price Index (CPI) is now expected to increase 1.5 percent in 2015, 0.3 of a percentage point below the previous forecast. In 2016, the CPI is projected to increase 2.2 percent, the same as the previous forecast.

Personal income in current dollars is now expected to increase 4.3 percent in 2015, 0.2 of a percentage point below the previous forecast. Real personal income is currently projected to grow 2.5 percent in 2015, 0.3 of a percentage point below the previous forecast. In 2016, current-dollar personal income and real personal income are expected to increase 4.6 percent and 2.6 percent, respectively.

Beyond 2016, the economy will be on an expansion path, with job growth expected to be 1.0 percent in 2017 and 1.1 percent in 2018. Visitor arrivals are expected to increase 1.7 percent in 2017 and 2018. Visitor expenditures are expected to increase 4.1 percent in 2017 and 2018. Real personal income is projected to increase 2.7 percent in 2017 and 2.3 percent in 2018. Hawaii’s real GDP growth is expected to increase 2.2 percent in 2017 and 2.3 percent in 2018. The unemployment rate is expected to decrease to 3.4 percent in 2017 and 3.3 percent in 2018.

ACTUAL AND FORECAST OF KEY ECONOMIC INDICATORS FOR HAWAII: 2013 TO 2018
Economic Indicators 2013 2014 2015 2016 2017 2018
Actual Forecast
Total population (thousands) 1,409 1,420 1,434 1,448 1,463 1,477
Visitor arrivals (thousands) ¹ 8,174 8,283 8,486 8,636 8,782 8,931
Visitor days (thousands) ¹ 74,942 75,498 77,542 78,855 80,174 81,531
Visitor expenditures (million dollars) ¹ 14,521 14,857 15,149 15,847 16,499 17,178
Honolulu CPI-U (1982-84=100) 253.9 257.6 261.5 267.2 273.9 281.3
Personal income (million dollars) 63,468 65,861 68,693 71,853 75,446 79,218
Real personal income (millions of 2008$) ² 50,794 52,013 53,313 54,699 56,176 57,468
Non-agricultural wage & salary jobs (thousands) 618.6 625.3 632.2 639.8 646.2 653.3
Civilian unemployment rate 4.8 4.4 3.9 3.6 3.4 3.3
Gross domestic product (million dollars) ³ 75,235 78,095 81,409 84,733 87,919 91,692
Real gross domestic product (millions of 2009$) ³ 70,110 71,615 73,406 75,163 76,837 78,640
Gross domestic product deflator (2009=100) ³ 107.3 109.0 110.9 112.7 114.4 116.6
Annual Percentage Change
Total population 1.2 0.8 1.0 1.0 1.0 1.0
Visitor arrivals ¹ 1.8 1.3 2.5 1.8 1.7 1.7
Visitor days ¹ 0.6 0.7 2.7 1.7 1.7 1.7
Visitor expenditures ¹ 1.1 2.3 2.0 4.6 4.1 4.1
Honolulu CPI-U 1.8 1.4 1.5 2.2 2.5 2.7
Personal income 2.4 3.8 4.3 4.6 5.0 5.0
Real personal income ² 1.1 2.4 2.5 2.6 2.7 2.3
Non-agricultural wage & salary jobs 2.0 1.1 1.1 1.2 1.0 1.1
Civilian unemployment rate 4 -1.2 -0.4 -0.5 -0.3 -0.2 -0.1
Gross domestic product ³ 3.8 3.8 4.2 4.1 3.8 4.3
Real gross domestic product ³ 1.9 2.1 2.5 2.4 2.2 2.3
Gross domestic product deflator (2009=100) ³ 1.9 1.6 1.7 1.7 1.5 1.9

1/ Visitors who came to Hawaii by air or by cruise ship. Expenditures includes supplementary expenditures estimated by HTA
for 2013 and DBEDT thereafter.
2/ Using personal income deflator developed by the U.S. Bureau of Economic Analysis and estimated by DBEDT.
3/ 2014 and later years are estimated by DBEDT, data for earlier years from U.S. Bureau of Economic Analysis.
4/ Absolute change from previous year.
Source: Hawaii State Department of Business, Economic Development & Tourism, May 7, 2015.