Isle economy very close to recession, analyst says
STORY SUMMARY »
Some Hawaii residents and businesses may find that they have less money to spend and less confidence in spending it next year, as the state's 11-year-long economic expansion slows almost to the point of a recession, said economist Leroy Laney.
Laney, economics consultant to First Hawaiian Bank and a professor of economics and finance at Hawaii Pacific University, gave the outlook in remarks prepared for yesterday's First Hawaiian's business outlook forum.
FULL STORY »
Economist Leroy Laney is forecasting slower growth for the isle economy and said that the state is courting economic recession.
Real personal income and visitor arrivals are expected to grow slightly in 2008, but Laney projects job growth will fall, the unemployment rate will rise and inflation will remain high.
These economic factors, particularly the high rate of inflation, have left Hawaii skirting very close to a full-blown economic recession, he said in remarks prepared for First Hawaiian Bank's annual business outlook forum yesterday.
"The rate of growth has slowed on many fronts, and this slower rate will likely be a feature of the islands' landscape for the next several years," said Laney, who is an economics consultant to First Hawaiian and a professor of economics and finance at Hawaii Pacific University.
The slower economy -- due mainly to the end of the real estate boom, the beginning of a construction slowdown and weakening in the performance of the visitor industry -- is likely to cause job growth to decelerate from the estimated pace of 2 percent in 2007 to around 1 percent in 2008. That will hamper current dollar personal income growth, he said.
"Hawaii real personal income can come in at about 1 percent in 2007, which avoids recession, but comes closer to one," Laney said.
Inflation will drop to 4 percent, but at that rate housing costs as well as the price of goods and services will remain high, he said. Consumer spending confidence could be affected by high housing costs and inflation, Laney said.
Personal income growth is in its 11th year of expansion, but credit card spending slowed somewhat during the first half of 2007 and sales of new cars and trucks dropped to a benchmark low, Laney said.
The state's visitor industry will grow another 1.5 percent, but mainland numbers still won't be enough to offset continued anemic performance from Japan, he said. And while there are construction projects in the pipeline, the pace has slowed, he said.
Hawaii excise tax revenues are still respectable, but have fallen into the single-digit range, Laney said. These revenues often account for more than half of the state's general fund so the drop from the boom years of 2004 and 2005 is sure to be felt across all islands, he said.