UH report warns of economic slowdown
University economists say home building and tourism have been sidelined for now
The latest annual state forecast by the University of Hawaii Economic Research Organization predicts further slowing of growth in every segment of the economy, from tourism to residential real estate.
UHERO noted in a report released yesterday that two pillars of Hawaii's economy -- tourism and residential construction -- have been sidelined for now.
Residential construction is expected to slow down along with the real estate market, and will no longer be an important contributor to job and income growth.
Construction jobs are only expected to grow by less than 1 percent this year, and to decline by about 1.8 percent in the following two years.
Likewise, the visitor industry expansion took a breather last year, with essentially flat arrivals and a decline in real spending.
UHERO believes that Japanese arrivals have bottomed out, but expects growth rising to 1.8 percent by 2009.
Overall visitor arrivals are expected to grow by just 0.08 percent this year, and between 1.4 to 1.8 percent next year and in 2009.
Growth conditions should improve as some 5,000 or so additional units are added to the hotel room stock by 2010.
Relatively high inflation will be with us for the next few years, leading UHERO to forecast only a gradual slowing of local inflation, which this year is expected to be about 4.8 percent. By 2009, it's expected to ease to 3.4 percent.
Economist Byron Gangnes, one of the forecast's authors, said the team is more pessimistic than a month ago, noting the persistence of high inflation.
"We all noted the inflation that occurred in the first half of 2006," he said. "We expected it would ease in the second half of the year, but instead it came in at the same rate."
A sharper-than-expected housing market correction could lead to even more job and income loss. On the other hand, if oil prices remain low, it could stimulate travel.
However, UHERO says there are no warning signs of an outright end to Hawaii's economic expansion on the horizon.
Job and income growth are expected to slow, while the unemployment rate eases upward, but not cease altogether.
Military construction, new visitor accommodations, retail developments and mass transit hold promise for another construction boom in the next decade, the organization said.