DBEDT cuts 2008 forecast
A tourism downturn and higher inflation rate are factors in DBEDT's forecast
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The state yesterday throttled back its forecast for visitor arrivals and other key economic indicators for this year and next, with real personal income, jobs, gross domestic product and tourism lagging behind previous expectations.
However, job growth in professional and business services, construction, food service, and health services should counter weakened visitor numbers, according to the quarterly forecast issued by the state Department of Business, Economic Development and Tourism.
"As a result, we continue to forecast moderate economic growth during the next few years," said DBEDT Director Theodore E. Liu.
The agency also said that the total value of statewide private building permits declined 17 percent for the last quarter of 2007 and 4.9 percent for the year, marking the first year-over-year decline in the value of new private building permits in nine years.
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In a broad sweep of downward revisions to its quarterly economic growth forecast, the state Department of Business, Economic Development and Tourism said yesterday tourism, real income, and the total number of jobs are expected to slip in 2008.
The department said, however, that it expects some strength to remain in other areas of the economy.
"As a result, we continue to forecast moderate economic growth during the next few years," said DBEDT Director Theodore Liu.
Visitor arrivals, which in last quarter's report were expected to grow 1 percent, are now forecast to decline 1.4 percent for 2008, as arrivals on both domestic and international flights were down last year. DBEDT projects 1.2 percent growth in visitor arrivals in 2009, followed by growth of 1.4 percent in 2010.
"Tourism is linked to business on the mainland -- the prognosis is more negative as the U.S. economy slows more sharply," said Paul Brewbaker, Bank of Hawaii's chief economist.
In 2007, the Honolulu consumer price index increased 4.8 percent, 0.3 of a percentage point higher than DBEDT'S forecast. The index, a benchmark for inflation, is expected to rise 4 percent this year, 0.2 percentage points higher than in the previous forecast. Forecast CPI growth for 2009 remains at 3.4 percent.
That higher inflation rate pushed down revisions in real income growth by half a percentage point to 1.3 percent estimated for 2007 from the November forecast. This year, real personal income is projected to grow 1.6 percent, down 0.2 of a percentage point from the previous forecast.
DBEDT also lowered its 2008 forecast for job growth to 1.4 percent from 1.5 percent last quarter. The job growth forecast for 2009 remains unchanged at 1.3 percent.
Hawaii's real GDP is estimated to have increased 2.7 percent in 2007, down 0.2 of a percentage point from the previous estimate. Real GDP is projected to grow 2.5 percent this year and in 2009, down 0.3 and 0.2 of a percentage point, respectively.
The state's numbers were less optimistic than those released by the University of Hawaii Economic Research Organization in mid-December, when it forecast of 2008 visitor arrivals growth at 0.3 percent. UHERO estimated 2008 real income growth at 1.9 percent by 2008. Inflation this year was forecast to be 5 percent.
UHERO economist Byron Gangnes declined to comment on the specifics of the new DBEDT report; a new UHERO report comes out next month.
"Clearly the external economic environment has gotten worse," he said. "We are likely to be downgrading our forecast somewhat for Hawaii."
DBEDT also reported that the statewide total value of private building permits decreased 4.9 percent, or $184.6 million, to $3.6 billion last year from 2006, marking the first year-over-year decline in the value of new private building permits since 1998. In the fourth quarter of 2007, the total value decreased $177.9 million, or 17 percent, from 2006 to $866 million, while the value of new commercial and industrial permits decreased $26.6 million, or 8.7 percent.
"It is not collapsing as it is on the mainland," Brewbaker said. "The nonhousing commercial and government contributions that are relatively stable are actually helping prevent construction from declining as much as it has in previous cycles."