Outlook for the Economy

1st Quarter 2018 Report

Hawaii’s economy is expected to continue positive growth in 2018 and 2019. 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 2018 Blue Chip Economic Consensus Forecasts, U.S. real GDP is expected to increase by 2.7 percent in 2018, 0.2 of a percentage point above the growth rate projected in the November 2017 forecast. For 2019 the consensus forecast predicts an overall 2.4 percent growth in U.S. real GDP.

According to the January 2018 Blue Chip Economic Consensus Forecast, real GDP growth for Japan is now expected to increase 1.4 percent in 2018, 0.2 of a percentage point above the growth rate projected in the November 2017 forecast. For 2019, the consensus forecast now projects an overall 1.1 percent growth rate for Japanese real GDP.

For the local economy, DBEDT expects that visitor expenditures and real GDP will both grow at a higher rate than projected in the previous forecast for 2018.

Overall, Hawaii’s economy, as measured by real GDP, is projected to show a 1.7 percent increase in 2018, 0.2 of a percentage point above the growth rate forecast last quarter. The real GDP growth forecast for 2019 is 1.6 percent, 0.1 of a percentage point above the previous forecast.

Hawaii’s unemployment rate is projected to be 2.6 percent in 2018, 0.3 of a percentage point below the previous forecast. The unemployment rate in 2019 is projected to be 3.0 percent, 0.2 of a percentage point below the previous forecast.

Visitor arrivals are expected to increase 2.7 percent in 2018, 0.4 of a percentage point above the previous forecast. The forecast for visitor days in 2018 also increased 0.4 of a percentage point to 2.8 percent. The 2018 forecast for visitor expenditure growth was revised upward to 4.5 percent, from 3.9 percent growth projected in the previous forecast. For 2019, the growth rate of visitor arrivals, visitor days, and visitor expenditures are now expected to be 1.6 percent, 1.6 percent, and 3.7 percent, respectively.

The projection for the non-agricultural wage and salary job growth rate for 2018 is 1.0 percent, 0.1 of a percentage point above the previous forecast. In 2019, jobs are projected to increase 0.9 percent, 0.1 of a percentage point below the previous forecast.

The Honolulu Consumer Price Index (CPI) is expected to increase 2.4 percent in 2018, 0.1 of a percentage point above the previous forecast. In 2019, the CPI is projected to increase 2.7 percent, 0.4 of a percentage point above the previous forecast.

Personal income in current dollars is expected to increase 3.6 percent in 2018, 0.2 of a percentage point above the previous forecast. Real personal income is now projected to grow 1.5 percent in 2018, same as the previous forecast. In 2019, current-dollar personal income and real personal income are expected to increase 3.9 and 1.5 percent, respectively.

Beyond 2019, the economy is expected to continue its expansion path, with job growth projected to be 0.9 percent in 2020 and 0.8 percent in 2021. Visitor arrivals are expected to increase 1.4 percent in 2020 and 2021. Visitor expenditures are expected to increase 3.5 percent in 2020 and 2021. Real personal income is projected to increase 1.5 percent in 2020 and 1.3 percent in 2021. Hawaii’s real GDP growth is expected to increase 1.4 percent in both 2020 and 2021. The unemployment rate is expected to increase to 3.2 percent in 2020 and 3.4 percent in 2021.

ACTUAL AND FORECAST OF KEY ECONOMIC INDICATORS FOR HAWAII: 2016 TO 2021

Economic Indicators 2016 2017 2018 2019 2020 2021
Actual Forecast
Total population (thousands) 1,429 1,428 1,435 1,443 1,452 1,462
Visitor arrivals (thousands) ¹ 8,934 9,383 9,634 9,789 9,929 10,069
Visitor days (thousands) ¹ 80,225 83,991 86,331 87,753 89,036 90,328
Visitor expenditures (million dollars) ¹ 15,911 16,897 17,658 18,312 18,955 19,614
Honolulu CPI-U (1982-84=100) 265.3 272.0 278.5 286.1 294.4 303.5
Personal income (million dollars) ² 71,946 74,176 76,847 79,844 83,038 86,359
Real personal income (millions of 2009$) ³ 54,653 55,309 56,139 56,981 57,836 58,581
Non-agricultural wage & salary jobs (thousands) 647.6 654.8 661.3 667.3 673.3 678.7
Civilian unemployment rate 4 3.0 2.5 2.6 3.0 3.2 3.4
Gross domestic product (million dollars) 5 84,671 87,634 90,965 94,421 98,104 101,930
Real gross domestic product (millions of 2009$) 5 74,026 75,211 76,489 77,713 78,801 79,904
Gross domestic product deflator (2009=100) 5 114.4 116.5 118.9 121.5 124.5 127.6
Annual Percentage Change
Total population 0.2 -0.1 0.5 0.6 0.6 0.7
Visitor arrivals ¹ 2.9 5.0 2.7 1.6 1.4 1.4
Visitor days ¹ 2.0 4.7 2.8 1.6 1.5 1.5
Visitor expenditures ¹ 5.3 6.2 4.5 3.7 3.5 3.5
Honolulu CPI-U 2.0 2.5 2.4 2.7 2.9 3.1
Personal income ² 3.3 3.1 3.6 3.9 4.0 4.0
Real personal income ³ 1.9 1.2 1.5 1.5 1.5 1.3
Non-agricultural wage & salary jobs 1.4 1.1 1.0 0.9 0.9 0.8
Civilian unemployment rate 4 -0.6 -0.5 0.1 0.4 0.2 0.2
Gross domestic product 5 3.6 3.5 3.8 3.8 3.9 3.9
Real gross domestic product 5 1.9 1.6 1.7 1.6 1.4 1.4
Gross domestic product deflator (2009=100) 5 1.7 1.9 2.1 2.2 2.5 2.5

1/ Visitors who came to Hawaii by air or by cruise ship. Expenditures includes supplementary expenditures. 2017 supplementary expenditure was estimated by DBEDT.
2/ The 2017 values are estimated based on actual values in the first three quarters of 2017.
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/ 2017 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, 2018.