UH economists expect Hawaii inflation to hit 5.2 percent
A slowdown in growth also is expected in the state's job market and visitor industry
Hawaii's consumer prices are expected to climb higher this year than originally predicted, slowing growth in purchasing power, according to a quarterly forecast released yesterday by the University of Hawaii Economic Research Organization.
The organization raised its inflation rate forecast to 5.2 percent from the 3.8 percent it predicted in May.
"Inflation in Hawaii has reared its ugly head," the report said, noting that Honolulu's inflation topped the nation in the first half of this year.
The year 2007 will bring not only a slowing visitor industry, but higher unemployment rates and a sharp drop in real income growth, the UH report said.
That not only means new risks, but a cloudier economic outlook for consumers and businesses.
The UHERO report, prepared by Carl S. Bonham and Byron Gangnes, also cited the following:
» Real personal income -- income adjusted for inflation -- is now expected to increase by only 1 percent this year compared to a 3 percent increase last year. It is, however, expected to rebound to 2 percent growth in 2007.
» A slowing visitor industry. The UH economic organization revised its visitor arrivals forecast to 1.5 percent growth this year, compared to the 2.8 percent May forecast, due to the poor performance of the Japanese market.
» UHERO expects a more pronounced slowdown in the job market in the next two years. Aggregate job gains are expected to slow to 1.2 percent next year compared to 2.5 percent growth this year. The unemployment rate is expected to move above 3 percent next year.
» Construction job growth is expected to decline from 13.7 percent last year to 2.3 percent in 2007.
The surge in inflation brings with it unpredictable risks, because there is no telling how businesses and consumers will react.