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Economic outlook worsens


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POSTED: Tuesday, August 25, 2009

Just when you thought the economy had reached the point where it couldn't get any worse, the state says to think again.

Performance is likely to worsen for Hawaii's lead visitor industry, which along with the national recession will continue to affect Hawaii's economy negatively throughout 2009, according to a quarterly state economic report released yesterday by the state Department of Business, Economic Development and Tourism.

DBEDT's forecast for visitor arrivals in Hawaii was unchanged from the previous one in May; however, the agency now expects visitor expenditures will decrease 11.5 percent, a drop of 3.6 percentage points from the prior forecast.

“;Not in my time have we ever trashed (room) rates to this level on an extended basis,”; said David Carey, president and chief executive officer for Outrigger Enterprises Group. “;Hotel discounting is in the 20 percent range. We haven't seen specials like that since my father-in-law's time.”;

Due to the massive drop in visitor spending and a 5.8 percent drop in the number of days that visitors spend in Hawaii, the department now expects jobs to drop 3 percent this year as compared with the previously forecast 2.1 percent.

               

     

 

Economic Forecast

       

       

                                       

               

               

             

             

               

               

               

             

             

               

               

               

             

             

               

               

               

             

             

               

               

               

               

             

             

               

               

               

             

             

               

               

               

             

         

       

 

               

Indicator 2009Annual change 2010
Visitor arrivals-5.9%+1.2%
Visitor spending-11.5%+2.9%
Honolulu CPI*+0.6%+1.5%
Job growth-3.0%-0.4% 
Real personal income+0.4%0.0%
Real gross domestic product-1.1%+0.4%

        * Consumer price index (inflation)

       

Source: Hawaii Department of Business, Economic Development and Tourism

       

Economists said lowered inflation—it is now expected to rise only 0.6 percent in 2009—will keep the real gross state domestic product, or market value of all goods and services made in Hawaii, from contracting as much as previously forecast. The real gross state domestic product will fall 1.1 percent as compared with the previously forecast 1.6 percent, DBEDT said. Likewise, personal income growth is expected this year to increase 1 percent, which comes out to a 0.4 percent increase after adjusting for inflation.

The net result of these economic measures is that Hawaii's economy is not likely to recover this year, and that when it does, the improvements will be gradual, DBEDT said. Economic stabilization is not likely to come until next year, and it will be 2011 before signs of modest growth emerge, the department said.

“;Our forecast for this period shows a more gradual decline,”; said DBEDT Director Ted Liu. “;We do not believe it is prudent to predict an economic recovery yet, and all indications are that any recovery would be gradual.”;

Assuming continued improvement in national and international conditions, modest growth in the state economy is forecast to return by 2011, DBEDT said.

“;I think things will be flat to down in the next two years,”; Carey said. “;I like DBEDT's forecast better. It took 4 1/2 years to (recover from) 2001, and this is a more systemic reduction.”;

On a brighter note for Hawaii's tourism-dependent economy, recent forecasts for the U.S. economy show smaller declines in 2009, the department said. Still, forecasts of key international economies are mixed, DBEDT said.

But whether national and international economic improvement will increase demand remains to be seen, Carey said.

“;It's the era of the new frugality, and I see that persisting for several years,”; he said.

In 2010, DBEDT expects to see Hawaii's visitor arrivals grow 1.2 percent, with real personal income flat and real GDP rising by 0.4 percent. Inflation will continue to remain low; however, more jobs likely will be lost.

If national and international economic conditions continue to improve, DBEDT said visitor arrivals in 2011 should increase by 4.3 percent and spending by 12 percent. Real personal income is likely to rise 0.6 percent in 2011 and real GDP by 1.5 percent, the department said. Jobs probably will grow by 0.8 percent in 2011, DBEDT said.

“;We think we'll see a much stronger Japanese and Asian visitor presence, and these markets are higher-spending,”; said state economist Pearl Imada Iboshi. “;Still, even with the improvement, we'll just barely be back to the 2008 level.”;

Barring unforeseen events, the gradual pace of recovery should continue into 2012, DBEDT said.