Outlook for the Economy

1st Quarter 2016

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 January 2016 Blue Chip Economic Consensus Forecasts, U.S. real GDP is expected to increase by 2.5 percent in 2016, 0.1 of a percentage point lower than the 2.6 percent growth rate projected in the November 2015 forecast. For 2017 the consensus forecast predicts an overall 2.5 percent growth in U.S. real GDP.

According to the January 2016 Blue Chip Economic Consensus Forecast, real GDP growth for Japan is now expected to increase 1.1 percent in 2016; the same as the growth rate projected in the November 2015 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 lower rates than projected in the previous forecast. For GDP growth, the current forecast was the same as the previous forecast.

Overall, Hawaii’s economy, as measured by real GDP, is projected to show a 2.3 percent increase in 2016; the same as the growth rate forecasted last quarter. The real GDP growth forecast in 2017 is 2.4 percent, also same as the growth rate forecasted last quarter.

Hawaii’s unemployment rate is projected to be 3.5 percent in 2016, 0.2 of a percentage point lower than the previous forecast. The unemployment rate in 2017 is now projected to be 3.3 percent, also 0.2 of a percentage point lower than the previous forecast.

Visitor arrivals are expected to increase 1.9 percent in 2016, 0.2 of a percentage point above the previous forecast. The forecast for visitor days in 2016 decreased 0.1 of a percentage point to 1.7 percent. The forecast for visitor expenditure growth in 2016 was revised downward to 2.4 percent, from 3.5 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 1.9 percent, 1.9 percent, and 3.9 percent, respectively.

The projection for the non-agricultural wage and salary job growth rate for 2016 is 1.3 percent, 0.1 of a percentage point above the previous forecast. In 2017, jobs are projected to increase 1.2 percent, 0.2 of a percentage point above the previous forecast.

The Honolulu Consumer Price Index (CPI) is now expected to increase 2.0 percent in 2016, 0.3 of a percentage point below the previous forecast. In 2017, the CPI is projected to increase 2.2 percent, also 0.3 of a percentage point below the previous forecast.

Personal income in current dollars is now expected to increase 4.8 percent in 2016; the same as the previous forecast. Real personal income is currently projected to grow 3.0 percent in 2016; the same as the previous forecast. In 2017, current-dollar personal income and real personal income are expected to increase 5.0 percent and 3.1 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 1.8 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 3.0 percent in 2018 and 2019. Hawaii’s real GDP growth is expected to increase 2.4 percent in 2018 and 2.2 percent in 2019. The unemployment rate is expected to decrease to 3.1 percent in 2018 and 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 8,308 8,649 8,818 8,985 9,143 9,305
Visitor days (thousands) ¹ 75,646 78,281 79,637 81,177 82,629 84,108
Visitor expenditures (million dollars) ¹ 14,943 15,282 15,645 16,262 16,935 17,633
Honolulu CPI-U (1982-84=100) 257.6 260.2 265.4 271.2 277.4 284.1
Personal income (million dollars) ² 65,348 68,419 71,703 75,289 79,053 83,006
Real personal income (millions of 2009$) ³ 52,346 54,231 55,857 57,610 59,367 61,124
Non-agricultural wage & salary jobs (thousands) 625.3 634.8 643.1 650.8 657.9 665.2
Civilian unemployment rate 4 4.4 3.7 3.5 3.3 3.1 3.1
Gross domestic product (million dollars) 5 76,171 79,637 82,935 86,199 89,945 93,670
Real gross domestic product (millions of 2009$) 5 69,436 70,825 72,454 74,193 75,973 77,645
Gross domestic product deflator (2009=100) 5 109.7 112.4 114.5 116.2 118.4 120.6
Annual Percentage Change
Total population 0.8 0.8 0.8 0.8 0.9 0.9
Visitor arrivals ¹ 1.6 4.1 1.9 1.9 1.8 1.8
Visitor days ¹ 0.9 3.5 1.7 1.9 1.8 1.8
Visitor expenditures ¹ 2.9 2.3 2.4 3.9 4.1 4.1
Honolulu CPI-U 1.4 1.0 2.0 2.2 2.3 2.4
Personal income ² 4.7 4.7 4.8 5.0 5.0 5.0
Real personal income ³ 2.8 3.6 3.0 3.1 3.0 3.0
Non-agricultural wage & salary jobs 1.1 1.5 1.3 1.2 1.1 1.1
Civilian unemployment rate 4 -0.4 -0.7 -0.2 -0.2 -0.2 0.0
Gross domestic product 5 2.7 4.5 4.1 3.9 4.3 4.1
Real gross domestic product 5 0.4 2.0 2.3 2.4 2.4 2.2
Gross domestic product deflator (2009=100) 5 2.3 2.5 1.8 1.5 1.9 1.9

1/ Visitors who came to Hawaii by air or by cruise ship. Expenditures includes supplementary expenditures estimated by HTA for 2014 and DBEDT thereafter.
2/ The 2015 values are estimated based on actual values in the first three quarters of 2015.
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/ 2015 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 5, 2016.