STAR-BULLETIN FILE PHOTO / 2005
Bank of Hawaii chief economist Paul Brewbaker sees modest growth in visitor arrivals in 2009. Above, beach goers at Ala Moana take advantage of warm weather as the sun goes down.
State slump seen through ‘08
Bankoh economist sees growth in state languishing through ‘08
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While Hawaii's economy will continue to experience shocks as a result of higher oil prices, falling tourism and the decline in residential investment through the end of 2008, slight recovery is anticipated in 2009.
In his latest economic forecast, released yesterday, Bank of Hawaii chief economist Paul Brewbaker forecast that jobs, personal income, visitor arrivals and the construction sector would continue to decline in 2008 and that inflation would rise. The construction industry is likely to fall further in 2009. However, Brewbaker is anticipating modest growth in visitor arrivals and a slight decline in inflation.
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Hawaii's economy continues to face risks after experiencing economic shocks during the first half of the year due to higher oil prices, falling tourism and the decline in residential investment, according to Bank of Hawaii's most recent economic forecast.
» Job growth: -0.6 percent
» Real personal income growth: -0.2 percent
» Inflation: 4.7 percent
» Visitor arrival drop: -6 percent
Source: Paul Brewbaker, chief economist, Bank of Hawaii
While Hawaii's economy did not completely unravel through midyear 2008, growth has slowed to a crawl and most facets of the economy are expected to continue dampening through the end of the year, Bank of Hawaii chief economist Paul Brewbaker said of his forecast, which was released yesterday.
"There's just not a lot of oomph," Brewbaker said.
In the forecast, Brewbaker anticipated that jobs, personal income, visitor arrivals and the construction sector would continue to decline in 2008 and that inflation would rise. Brewbaker said the construction industry is likely to fall further in 2009. However, he anticipated modest growth in visitor arrivals and a slight decline in inflation.
"Real income will probably be close to flat for the year, but the risk of a small decline for the year is creeping into the forecast," he said.
Job growth has slowed to a few tenths of 1 percent and Hawaii's unemployment rate, which rose to 3.5 percent in June 2008, is expected to continue to drift higher in 2008 and 2009, Brewbaker said. He projected a 0.3 percent decline in job growth in 2008 followed by a 0.6 rise in job growth in 2009. Brewbaker forecasted a 0.2 percent drop in personal income in 2008 followed by a 0.9 percent rise in 2009.
When it came to the state's key visitor industry, Brewbaker's outlook was more optimistic than the state Department of Business Economic Development & Tourism and slightly more pessimistic than the University of Hawaii Economic Research Organization (UHERO).
"I have not revised my visitor forecast from April," he said. "People thought we were crazy in April when we said that it would be that bad and now they are telling me that it was worse."
While Brewbaker anticipated that total arrivals would fall by 6 percent and domestic arrivals would fall by 7.6 percent through 2008, he projected a modest 3.8 percent rise in total arrivals and a 4.7 percent rise in domestic arrivals in 2009.
Brewbaker's forecast on inflation, which included a 4.7 percent rise in 2008 and a 2.5 percent rise in 2009, was somewhere in the middle of his peers.
"A boost in unemployment from this year's tourism contraction, and a sticky inflation rate in the first half of 2008, will give way to a 1990s-style trajectory of falling inflation and rising unemployment in Hawaii," Brewbaker said.
In regard to Hawaii's construction industry, Brewbaker was one of the least optimistic of local economists. He anticipated a 6 percent decrease in construction in 2008 followed by a 3.2 percent decline in 2009 due in part to the decline of Hawaii's housing market.
"Really, housing is still the biggest thing at the end of the day. It's still about the subprime crisis, the credit crunch, the downturn in sales, the downturn in private residential construction and the downturn in home prices," Brewbaker said.
Housing compression has continued in 2008 and "bubbilicious" California markets have raised risks for Hawaii's valuations, but a bottom for housing may be forming later this year, Brewbaker said.
As a result, there's been about a 3,000-unit drop in new homes authorized for construction statewide. However, at least on Oahu, the constant-dollar volume of nonresidential construction has remained resilient, he said.
"Still, the housing contraction, much or most of which is offset by military housing privatization-related homebuilding will be a drag, and the credit crunch may impair nonresidential activity as well," Brewbaker said.