UH economists expect state’s growth to slow
High energy prices and the housing crisis will keep visitors at home
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A weakening U.S. economy and high energy prices has prompted the University of Hawaii Economic Research Organization to revise its state forecast a shade dimmer for this year and next year.
UHERO yesterday revised its visitor arrivals growth forecast for next year to 0.3 percent from 0.5 percent and reduced visitor days to 0.2 percent from 0.7 percent.
Inflation this year was revised to be slightly higher than originally predicted and real personal income growth slightly lower.
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A weakening U.S. economy and high energy prices translate to lower growth estimates for Hawaii's economy this year and in 2008, according to the University of Hawaii Economic Research Organization's fourth-quarter report.
UHERO yesterday revised its visitor arrivals growth forecast for 2008 to 0.3 percent from 0.5 percent, and reduced visitor days to 0.2 percent from 0.7 percent due largely to weakening U.S. economic conditions.
Calling the Japanese market "anemic," UHERO also said the switch to positive growth in the visitor industry would come from markets other than the United States and Japan.
Due to the surge in oil prices since midyear, UHERO raised its inflation forecast to 5 percent from 4.8 percent in the third quarter.
UHERO does not expect inflation to cool down until 2009 when it predicts the rate at 3.1 percent. Due to the higher inflation forecast, UHERO also revised its real income, or inflation adjusted, growth for 2008 to 1.6 percent from 1.9 percent, and does not expect it to rebound to 2 percent until 2009.
But UHERO does not see an end to the current economic expansion in the long run.
"There's no clear end in sight to the expansion we've experienced for the last near-decade now" said UHERO economist Byron Gangnes. "But we are continuing to see signs that we're cooling off from the really rapid pace of growth we experienced in 2004 and 2005."
Most of the revisions, said Gangnes, were due to a worse outlook for the U.S. economy because of higher energy prices and the indirect effects of the subprime mortgage crisis.
With oil at close to $100 per barrel, consumer spending in coming months is expected to be restrained. Just how restrained will become more clear as economists track holiday shopping.
The annual unemployment rate, which bottomed out at 2.4 percent last year, is predicted to ease to 3 percent by 2009.
The construction outlook, however, continues to look healthy.
Hotel renovations, as well as industrial and commercial construction, balance out the weakening residential sector. But construction costs also will continue to rise, says UHERO, resulting in negative inflation-adjusted contracting receipts next year.
Home prices appear to have stabilized for now after some decline in 2006. Oahu's median home prices have held up, posting 1.3 percent growth for the year through November. But the neighbor island home markets dropped -- 11 percent for the first three quarters of this year on Maui, 5 percent lower on the Big Island and 5 percent lower on Kauai compared to the same period a year ago.