Outlook for the Economy

4th Quarter 2014

Based on the most recent developments in the national and global economies, the performance of Hawaii’s tourism industry, the labor market conditions, and growth of personal income and tax revenues, Hawaii’s economy is expected to continue positive growth for the rest of 2014 and into 2015. Overall, the current DBEDT forecast is more 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 November 2014 Blue Chip Economic Consensus Forecasts, U.S. real GDP is expected to increase by 2.2 percent in 2014 as a whole, 0.1 of a percentage point higher than the 2.1 percent growth rate projected in the August 2014 forecast. For 2015 the consensus forecast now expects an overall 3.0 percent growth in U.S. real GDP, the same as the August 2014 forecast.

According to the November 2014 Blue Chip Economic Consensus Forecast, real GDP growth for Japan is now expected to increase 0.9 percent in 2014, 0.5 of a percentage point lower than the 1.4 percent growth rate projected in the August 2014 forecast. For 2015, the consensus forecast now expects an overall 1.3 percent growth in Japanese real GDP, same as the August 2014 forecast.
For the local economy, DBEDT expects some of the economic indicators will grow at a faster rate than that of the previous forecast, and some other economic indicators will grow at the same growth rate projected in the previous forecast.

Overall, Hawaii’s economy measured by real GDP, is projected to show a 2.6 percent increase in 2014, the same as the growth rate forecasted last quarter. Real GDP growth in 2015 is expected at 2.8 percent, 0.6 of a percentage point higher than the growth rate forecasted last quarter.

Hawaii’s unemployment rate is projected to be 4.4 percent in 2014 and 4.1 percent in 2015, the same as the previous forecast.

Visitor arrivals are expected to increase 0.8 percent in 2014, 0.1 of a percentage point higher than the previous forecast. The forecast for visitor days in 2014 decreased 0.5 of a percentage point to 0.3 percent. The forecast for visitor expenditure in 2014 is revised upward to 2.7 percent, from 2.6 percent growth projected in the previous forecast. For 2015, the growth rates of visitor arrivals, visitor days, and visitor expenditures are now expected to be 1.9 percent, 2.2 percent, and 3.6 percent, respectively.

The projection for non-agricultural wage and salary job growth rate in 2014 is 1.3 percent, 0.1 of a percentage point higher than the previous forecast. In 2015, jobs are projected to increase 1.5 percent, also same as the previous forecast.

The Honolulu Consumer Price Index (CPI), which increased 1.8 percent in 2013, is now expected to increase 1.5 percent in 2014, the same as the previous forecast. In 2015, the CPI is projected to increase 2.2 percent, also the same as the previous forecast.

Personal income in current dollars is now expected to increase 4.0 percent in 2014, the same as the previous forecast. Real personal income is currently projected to grow 2.6 percent in 2014, also the same as the previous forecast. In 2015, current-dollar personal income and real personal income are expected to increase 4.5 percent and 2.5 percent, respectively.

Beyond 2015, the economy will be on an expansion path, with job growth expected to increase 1.4 percent in 2016 and 1.3 percent in 2017. Visitor arrivals are expected to increase 1.9 percent in 2016 and 2017. Visitor expenditures are expected to increase 4.6 percent in 2016 and 4.2 percent in 2017. Real personal income is projected to increase 2.3 percent in 2016 and 2.0 percent in 2017. Hawaii’s real GDP growth is expected to increase 2.5 percent in 2016 and 2.2 percent in 2017. The unemployment rate is expected to decrease to 3.8 percent in 2016 and 3.5 percent in 2017.

ACTUAL AND FORECAST OF KEY ECONOMIC INDICATORS FOR HAWAII: 2012 TO 2017
Economic Indicators 2012 2013 2014 2015 2016 2017
Actual Forecast
Total population (thousands) 1,390 1,404 1,418 1,432 1,447 1,461
Visitor arrivals (thousands) ¹ 8,029 8,174 8,237 8,395 8,556 8,714
Visitor days (thousands) ¹ 74,519 74,942 75,130 76,801 78,238 79,662
Visitor expenditures (million dollars) ¹ 14,365 14,521 14,913 15,456 16,164 16,838
Honolulu CPI-U (1982-84=100) 249.5 253.9 257.7 263.4 270.5 279.2
Personal income (million dollars) 61,968 63,468 66,007 68,977 72,288 75,903
Real personal income (millions of 2008$) ² 50,245 50,794 52,137 53,430 54,661 55,772
Non-agricultural wage & salary jobs (thousands) 606.3 617.6 625.6 635.0 643.9 652.3
Civilian unemployment rate 5.7 4.8 4.4 4.1 3.8 3.5
Gross domestic product (million dollars) ³ 72,512 75,235 78,513 82,365 86,240 90,032
Real gross domestic product (millions of 2009$) ³ 68,825 70,110 71,941 73,956 75,805 77,472
Gross domestic product deflator (2009=100) ³ 105.4 107.3 109.1 111.4 113.8 116.2
Annual Percentage Change
Total population 1.0 1.0 1.0 1.0 1.0 1.0
Visitor arrivals ¹ 10.0 1.8 0.8 1.9 1.9 1.9
Visitor days ¹ 8.8 0.6 0.3 2.2 1.9 1.8
Visitor expenditures ¹ 17.9 1.1 2.7 3.6 4.6 4.2
Honolulu CPI-U 2.4 1.8 1.5 2.2 2.7 3.2
Personal income 4.7 2.4 4.0 4.5 4.8 5.0
Real personal income ² 1.4 1.1 2.6 2.5 2.3 2.0
Non-agricultural wage & salary jobs 2.2 1.9 1.3 1.5 1.4 1.3
Civilian unemployment rate -0.8 -0.9 -0.4 -0.3 -0.3 -0.3
Gross domestic product ³ 4.0 3.8 4.4 4.9 4.7 4.4
Real gross domestic product ³ 1.7 1.9 2.6 2.8 2.5 2.2
Gross domestic product deflator (2009=100) ³ 2.2 1.9 1.7 2.1 2.2 2.2

1/ Visitors who came to Hawaii by air or by cruise ship.
2/ Using personal income deflator developed by the U.S. Bureau of Economic Analysis.
3/ 2014 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, November 12, 2014.