Outlook for the Economy

4th Quarter 2016 Report

Hawaii’s economy is expected to continue positive growth for the rest of 2016 and into 2017. 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 November 2016 Blue Chip Economic Consensus Forecasts, U.S. real GDP is expected to increase by 1.5 percent in 2016, same as the growth rate projected in the August 2016 forecast. For 2017 the consensus forecast predicts an overall 2.2 percent growth in U.S. real GDP.

According to the November 2016 Blue Chip Economic Consensus Forecast, real GDP growth for Japan is now expected to increase 0.6 percent in 2016; 0.1 of a percentage point higher than the growth rate projected in the August 2016 forecast. For 2017, the consensus forecast now expects an overall 0.8 percent growth rate for Japanese real GDP.

For the local economy, DBEDT expects that visitor expenditures will grow at a higher rate than projected in the previous forecast for 2016 and 2017. For GDP growth, the current forecast was slightly higher than the previous forecast.

Overall, Hawaii’s economy, as measured by real GDP, is projected to show a 2.0 percent increase in 2016; 0.1 of a percentage point above the growth rate forecasted last quarter. The real GDP growth forecast in 2017 is 1.9 percent; same as the previous forecast.

Hawaii’s unemployment rate is projected to be 3.3 percent in 2016, 0.1 of a percentage point above the previous forecast. The unemployment rate in 2017 is projected to be 3.4 percent, same as the previous forecast.

Visitor arrivals are expected to increase 2.3 percent in 2016, 0.4 of a percentage point above the previous forecast. The forecast for visitor days in 2016 increased 0.3 of a percentage point to 1.9 percent. The forecast for visitor expenditure growth in 2016 was revised upward to 3.9 percent, from 3.2 percent growth projected in the previous forecast. For 2017, the growth rate of visitor arrivals, visitor days, and visitor expenditures are now expected to be 1.8 percent, 2.0 percent, and 4.0 percent, respectively.

The projection for the non-agricultural wage and salary job growth rate for 2016 is 2.0 percent, 0.2 of a percentage point above the previous forecast. In 2017, jobs are projected to increase 1.2 percent, same as the previous forecast.

The Honolulu Consumer Price Index (CPI) is now expected to increase 2.3 percent in 2016, same as the previous forecast. In 2017, the CPI is projected to increase 2.6 percent, 0.4 of a percentage point above the previous forecast.

Personal income in current dollars is now expected to increase 4.9 percent in 2016, 0.1 of a percentage point above the previous forecast. Real personal income is now projected to grow 2.4 percent in 2016; 0.4 of a percentage point below the previous forecast. In 2017, current-dollar personal income and real personal income are expected to increase 4.7 percent and 2.6 percent, respectively.

Beyond 2017, the economy is expected to continue its expansion path, with job growth projected to be 1.1 percent in 2018 and 2019. Visitor arrivals are expected to increase 1.7 percent in both 2018 and 2019. Visitor expenditures are expected to increase 4.1 percent in 2018 and 2019. Real personal income is projected to increase 2.5 percent in 2018 and 2019. Hawaii’s real GDP growth is expected to increase 1.7 percent in 2018 and 1.6 percent in 2019. The unemployment rate is expected to increase to 3.5 percent in 2018 and 3.6 percent in 2019.

ACTUAL AND FORECAST OF KEY ECONOMIC INDICATORS FOR HAWAII: 2014 TO 2019

Economic Indicators 2014 2015 2016 2017 2018 2019
Actual Forecast
Total population (thousands) 1,420 1,432 1,443 1,455 1,468 1,481
Visitor arrivals (thousands) ¹ 8,321 8,680 8,876 9,038 9,195 9,355
Visitor days (thousands) ¹ 75,932 78,620 80,126 81,755 83,201 84,671
Visitor expenditures (million dollars) ¹ 14,973 15,111 15,698 16,333 17,001 17,695
Honolulu CPI-U (1982-84=100) 257.6 260.2 266.1 273.1 280.7 288.0
Personal income (million dollars) 65,993 69,129 72,516 75,925 79,493 83,309
Real personal income (millions of 2009$) ² 51,866 53,815 55,107 56,540 57,953 59,402
Non-agricultural wage & salary jobs (thousands) 627.2 636.9 649.6 657.4 664.7 672.0
Civilian unemployment rate ³ 4.4 3.6 3.3 3.4 3.5 3.6
Gross domestic product (million dollars) 76,425 79,745 82,935 86,003 89,358 92,842
Real gross domestic product (millions of 2009$) 69,662 70,845 72,262 73,635 74,887 76,085
Gross domestic product deflator (2009=100) 109.7 112.6 114.8 116.8 119.3 122.0
Annual Percentage Change
Total population 0.8 0.8 0.8 0.8 0.9 0.9
Visitor arrivals ¹ 1.8 4.3 2.3 1.8 1.7 1.7
Visitor days ¹ 1.3 3.5 1.9 2.0 1.8 1.8
Visitor expenditures ¹ 3.1 0.9 3.9 4.0 4.1 4.1
Honolulu CPI-U 1.4 1.0 2.3 2.6 2.8 2.6
Personal income 5.1 4.8 4.9 4.7 4.7 4.8
Real personal income ² 4.3 3.8 2.4 2.6 2.5 2.5
Non-agricultural wage & salary jobs 1.4 1.5 2.0 1.2 1.1 1.1
Civilian unemployment rate ³ -0.5 -0.8 -0.3 0.1 0.1 0.1
Gross domestic product 3.3 4.3 4.0 3.7 3.9 3.9
Real gross domestic product 0.8 1.7 2.0 1.9 1.7 1.6
Gross domestic product deflator (2009=100) 2.4 2.6 2.0 1.8 2.2 2.3

1/ Visitors who came to Hawaii by air or by cruise ship. Expenditures includes supplementary expenditures estimated by HTA
2/ Using personal income deflator developed by the U.S. Bureau of Economic Analysis and estimated by DBEDT.
3/ Absolute change from previous year.
Source: Hawaii State Department of Business, Economic Development & Tourism, November 15, 2016.