Outlook for the Economy

3rd 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 for the rest of 2014 and into 2015. Overall, the current DBEDT forecast is mixed 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 August 2014 Blue Chip Economic Consensus Forecasts, U.S. real GDP is expected to increase by 2.1 percent in 2014 as a whole, 0.3 of a percentage point lower than the 2.4 percent growth rate projected in the May 2014 forecast. For 2015 the consensus forecast now expects an overall 3.0 percent growth in U.S. real GDP, same as the May 2014 forecast.

According to the August 2014 Blue Chip Economic Consensus Forecasts, real GDP growth for Japan is now expected to increase 1.4 percent in 2014, 0.1 of a percentage point higher than the 1.3 percent growth rate projected in the May 2014 forecast. For 2015, the consensus forecast now expects an overall 1.3 percent growth in Japanese real GDP, same as the May 2014 forecast.

For the local economy, DBEDT expects some of the economic indicators will grow at a faster rate and others will grow at slower rate than that of 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 higher than the growth rate forecasted last quarter. Real GDP growth in 2015 is expected at 2.2 percent, same as 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. Slightly higher than the previous forecast.

Visitor arrivals are expected to increase 0.7 percent in 2014, same as the previous forecast. The forecast for visitor days in 2014 also remained the same at 0.8 percent. The forecast for visitor expenditure in 2014 is revised upward to 2.6 percent, from 2.3 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, 2.3 percent, and 3.6 percent, respectively.

The projection for non-agricultural wage and salary job growth rate in 2014 is 1.2 percent, 0.2 of a percentage point lower than the previous forecast. In 2015, jobs are projected to increase 1.5 percent, 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, 0.6 of a percentage point below the previous forecast. In 2015, the CPI is projected to increase 2.2 percent, 0.3 of a percentage point below the previous forecast.

Personal income in current dollars is now expected to increase 4.0 percent in 2014, same as the previous forecast. The real personal income is currently projected to grow 2.6 percent in 2014, 0.5 of a percentage point above 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 the 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 1.8 percent in 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 2.3 percent in 2016 and 2.2 percent in 2017. 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 8,231 8,391 8,548 8,706
Visitor days (thousands) ¹ 74,519 74,942 75,515 77,223 78,646 80,077
Visitor expenditures (million dollars) ¹ 14,365 14,521 14,898 15,430 16,133 16,805
Honolulu CPI-U (1982-84=100) 249.5 253.9 257.7 263.4 270.5 279.2
Personal income (million dollars) 62,330 64,139 66,705 69,707 73,052 76,705
Real personal income (millions of 2008$) ² 50,245 50,794 52,137 53,430 54,661 55,772
Non-agricultural wage & salary jobs (thousands) 606.3 617.6 625.0 634.4 643.3 651.6
Civilian unemployment rate 5.8 4.7 4.4 4.1 3.8 3.5
Gross domestic product (million dollars) ³ 72,512 75,235 78,512 81,885 85,569 89,332
Real gross domestic product (millions of 2009$) ³ 68,825 70,110 71,941 73,524 75,215 76,870
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 0.7 2.0 1.9 1.8
Visitor days ¹ 8.8 0.6 0.8 2.3 1.8 1.8
Visitor expenditures ¹ 17.9 1.1 2.6 3.6 4.6 4.2
Honolulu CPI-U 2.4 1.8 1.5 2.2 2.7 3.2
Personal income 3.7 2.9 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 1.2 1.5 1.4 1.3
Civilian unemployment rate -0.7 -1.1 -0.3 -0.3 -0.3 -0.3
Gross domestic product ³ 4.0 3.8 4.4 4.3 4.5 4.4
Real gross domestic product ³ 1.7 1.9 2.6 2.2 2.3 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, August 20, 2014.