Outlook for the Economy

2nd 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 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 May 2014 Blue Chip Economic Consensus Forecasts, U.S. real GDP is expected to increase by 2.4 percent in 2014 as a whole, 0.5 of a percentage point lower than the 2.9 percent growth rate projected in the February 2014 forecast. For 2015 the consensus forecast now expects an overall 3.0 percent growth in U.S. real GDP, same as the February 2014 forecast.

Forecasts for Japan were also less optimistic for 2014 in the May 2014 Blue Chip Economic Consensus Forecasts. Real GDP growth for Japan is now expected to increase 1.3 percent in 2014, 0.4 of a percentage point lower than the 1.7 percent growth rate projected in the February 2014 forecast. For 2015, the consensus forecast now expects an overall 1.3 percent growth in Japanese real GDP, 0.1 of a percentage point below the February 2014 forecast.

For the local economy, DBEDT expects that some of the economic indicators will grow at a slower rate than that of the previous forecast.

Overall, Hawaii’s economy, as measured by real GDP is projected to show a 2.4 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 at 2.2 percent, the same as 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 0.7 percent in 2014, one percentage point below the previous forecast. The forecast for visitor days in 2014 decreased from 1.8 percent to 0.8 percent. The forecast for visitor expenditure in 2014 is revised downward to 2.3 percent, from 3.4 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, 2.0 percent, and 4.6 percent, respectively.

The projection for non-agricultural wage and salary job growth rate in 2014 is 1.4 percent, the same as the previous forecast. In 2015, jobs are projected to increase 1.5 percent, also the same as 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, the 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 4.0 percent in 2014, one percentage point lower than the previous forecast. The real personal income is currently projected to grow 2.1 percent in 2014, 0.7 of a percentage point lower than the previous forecast. In 2015, current-dollar personal income and real personal income are expected to increase 4.5 percent and 2.2 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 4.5 percent in 2017. Real personal income is projected to increase 2.1 percent in 2016 and 2.3 percent in 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 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 8,236 8,293 8,456 8,618 8,775
Visitor days (thousands) ¹ 74,519 75,396 76,010 77,501 78,973 80,402
Visitor expenditures (million dollars) ¹ 14,365 14,654 14,988 15,675 16,401 17,138
Honolulu CPI-U (1982-84=100) 249.5 253.9 259.3 265.7 273.7 281.9
Personal income (million dollars) 62,330 64,098 66,662 69,662 73,006 76,656
Real personal income (millions of 2008$) ² 50,245 50,863 51,928 53,083 54,185 55,415
Non-agricultural wage & salary jobs (thousands) 606.3 617.6 626.2 635.6 644.5 652.9
Civilian unemployment rate 5.8 4.7 4.2 4.0 3.8 3.5
Gross domestic product (million dollars) ³ 72,424 75,276 78,632 82,009 85,699 89,468
Real gross domestic product (millions of 2005$) ³ 61,877 63,176 64,693 66,116 67,637 69,125
Gross domestic product deflator (2005=100) ³ 117.0 119.2 121.5 124.0 126.7 129.4
Annual Percentage Change
Total population 1.0 1.0 1.0 1.0 1.0 1.0
Visitor arrivals ¹ 10.0 2.6 0.7 2.0 1.9 1.8
Visitor days ¹ 8.8 1.2 0.8 2.0 1.9 1.8
Visitor expenditures ¹ 17.9 2.0 2.3 4.6 4.6 4.5
Honolulu CPI-U 2.4 1.8 2.1 2.5 3.0 3.0
Personal income 3.7 2.8 4.0 4.5 4.8 5.0
Real personal income ² 1.4 1.2 2.1 2.2 2.1 2.3
Non-agricultural wage & salary jobs 2.2 1.9 1.4 1.5 1.4 1.3
Civilian unemployment rate -0.7 -1.1 -0.5 -0.2 -0.2 -0.3
Gross domestic product ³ 3.5 3.9 4.5 4.3 4.5 4.4
Real gross domestic product ³ 1.6 2.1 2.4 2.2 2.3 2.2
Gross domestic product deflator (2005=100) ³ 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/ Using personal income deflator developed by the U.S. Bureau of Economic Analysis.
3/ 2013 and later years are estimated by DBEDT, data for ealier years from U.S. Bureau of Economic Analysis.
Source: Hawaii State Department of Business, Economic Development & Tourism, May 8, 2014.