Outlook for the Economy

1st Quarter 2014

Based on the most recent development in the national and global economy, 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 at above 2.0 percent level between 2014 and 2017. Overall, the current DBEDT forecast is slightly 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 February 2014 Blue Chip Economic Consensus Forecasts, U.S. real GDP is expected to increase by 2.9 percent in 2014 as a whole, 0.4 of a percentage point higher than the 2.5 percent growth rate projected in the November 2013 forecast. For 2015, the consensus forecast now expects an overall 3.0 percent growth in U.S. real GDP.

Forecasts for Japan were slightly less optimistic for 2014 in the February 2014 Blue Chip Economic Consensus Forecasts. Real GDP growth for Japan is now expected to increase 1.7 percent in 2014, 0.1 of a percentage point lower than the 1.8 percent growth rate projected in the November 2013 forecast. For 2015, the consensus forecast now expects an overall 1.4 percent growth in Japanese real GDP.

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

Overall, Hawaii’s economy, measured by real GDP, is projected to show a 2.6 percent increase in 2014, 0.2 of a percentage point lower than the growth rate forecasted last quarter. Real GDP growth in 2015 is expected to be 2.2 percent, 0.3 of a percentage point lower than the growth rate forecasted last quarter.

Hawaii’s unemployment rate is projected to be 4.2 percent in 2014 and 4.0 percent in 2015.

Visitor arrivals are expected to increase 1.7 percent in 2014, one percentage point below the previous forecast. The forecast for visitor days in 2014 was lowered from 2.8 percent to 1.8 percent. The forecast for visitor expenditures in 2014 has been revised downward to 3.4 percent, from 4.2 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 2.0 percent, 1.9 percent, and 4.9 percent, respectively.

The projection for non-agricultural wage and salary job growth rate in 2014 is 1.4 percent, 0.4 of a percentage point below the previous forecast. In 2015, jobs are projected to increase 1.5 percent, 0.2 of a percentage point below the previous forecast.

The Honolulu Consumer Price Index (CPI), which increased 1.8 percent in 2013, is now expected to increase 2.1 percent in 2014, same as the previous forecast. In 2015, the CPI is projected to increase 2.5 percent.

Personal income in current dollars is now expected to increase 5.0 percent in 2014, 0.5 of a percentage point lower than the previous forecast. The real personal income is currently projected to grow 2.8 percent in 2014, 0.5 of a percentage point lower than the previous forecast. In 2015, current-dollar personal income and real personal income are expected to increase 5.3 percent and 2.7 percent, respectively.

Beyond 2015, the economy will be on the normal growth path with job growth expected to increase 1.4 percent in 2016 and 1.3 percent in 2017. Visitor arrivals are expected to increase 1.8 percent in both 2016 and 2017. Visitor expenditures are expected to increase 4.5 percent in both 2016 and 2017. Real personal income is projected to increase 2.4 percent in both 2016 and 2017. Hawaii’s real GDP growth is expected to increase 2.3 percent in 2016 and 2.2 percent in 2017. The unemployment rate is expected to be 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 8,236 8,376 8,539 8,696 8,857
Visitor days (thousands) 1/ 74,519 75,396 76,769 78,265 79,697 81,165
Visitor expenditures (million dollars) 1/ 14,365 14,654 15,153 15,897 16,613 17,352
Honolulu CPI-U (1982-84=100) 249.5 254.0 259.4 265.8 273.8 282.0
Personal income (million dollars) 2/ 62,330 64,823 68,064 71,671 75,613 79,772
Real personal income (millions of 2000$) 3/ 44,047 45,007 46,285 47,549 48,703 49,886
Non-agricultural wage & salary jobs (thousands) 605.3 613.3 621.5 630.9 639.7 648.0
Civilian unemployment rate 5.8 4.7 4.2 4.0 3.8 3.5
Gross domestic product (million dollars) 4/ 72,424 75,497 79,017 82,411 86,119 89,906
Real gross domestic product (millions of 2005$) 4/ 61,877 63,362 65,009 66,440 67,968 69,463
Gross domestic product deflator (2005=100) 4/ 117.0 119.2 121.5 124.0 126.7 129.4
Annual Percentage Change
Total population 1.0 1.0 1.0 1.0 1.0 1.0
Visitor arrivals 10.0 2.6 1.7 2.0 1.8 1.8
Visitor days 8.8 1.2 1.8 1.9 1.8 1.8
Visitor expenditures 17.9 2.0 3.4 4.9 4.5 4.5
Honolulu CPI-U 2.4 1.8 2.1 2.5 3.0 3.0
Personal income 3.7 4.0 5.0 5.3 5.5 5.5
Real personal income 1.3 2.2 2.8 2.7 2.4 2.4
Non-agricultural wage & salary jobs 1.9 1.3 1.4 1.5 1.4 1.3
Civilian unemployment rate 5/ -0.7 -1.1 -0.5 -0.2 -0.2 -0.3
Gross domestic product 3.5 4.2 4.7 4.3 4.5 4.4
Real gross domestic product 1.6 2.4 2.6 2.2 2.3 2.2
Gross domestic product deflator (2005=100) 1.8 1.8 2.0 2.1 2.2 2.2

1/ Visitors who came to Hawaii by air or by cruise ship.
2/ The 2013 values are estimated based on actual values in the first three quarters of 2013.
3/ DBEDT calculated using BEA estimate of nominal personal income deflated by U.S. Bureau of Labor Statistics Honolulu CPI-U.
4/ The 2013 value is estimated by DBEDT.
5/ Absolute change from previous year.
Source: Hawaii State Department of Business, Economic Development & Tourism, February 20, 2014.