Kauai’s economy headed for slowdown

A First Hawaiian Bank economist's report says 2007 real estate sales are down 4%

Kauai's economy is still going strong, supported by healthy construction and tourism levels, but is headed for a slowdown in coming years.

In his annual assessment of the Garden Isle's economy, First Hawaiian Bank economics consultant Leroy Laney cited a big-box store ban and Superferry woes as having possible, but unknown impacts for Kauai.

Meanwhile, the residential real estate downturn, forewarned several years earlier, is underway, and a rebound isn't expected soon.

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Kauai's economy is slowing down, although the outlook remains positive for 2007, according to an annual economic forecast by First Hawaiian Bank.

First Hawaiian Bank economics consultant Leroy Laney cited a healthy level of construction activity, in addition to growth in visitor arrivals, as bright spots in the forecast.

The long-anticipated downturn in the residential real estate market, however, is finally happening, he said, with year-to-date sales down 4 percent and prices off about 3 percent. It will likely plateau, but won't turn around in just one year.

"At times like this, it's important to remember that any economic cycle contains periods of cooling down," said Laney. "This is not only inevitable, it's required for infrastructure to catch up and for slowly rising incomes to help bring affordability back."

Laney also mentioned the limits of Kauai's Nawiliwili Harbor, which lags in infrastructure and limits the growth of the cruise industry as well as, potentially, the demands of the Superferry. How the Superferry will impact the economy remains to be seen, he said.

Kauai County's ban on stores larger than 75,000 square feet resulted in a huge split between consumers who can benefit from lower prices and small retailers that could be hurt by the competition.

"The irony is that something that at last promises to reduce Kauai's high cost of living is disallowed." said Laney.

Other bright spots that Laney noted for Kauai included the selection of the Garden Isle as the set for Ben Stiller's comedy "Tropic Thunder." It is the biggest film ever produced on Kauai.

The Pacific Missile Range Facility continues to be a strong economic force on Kauai. Diversified agriculture is also making gains, as Gay & Robinson looks to ethanol. Agritourism and ranching also continue to grow on Kauai.

While the labor market continues to remain tight statewide, inflation-adjusted personal income growth is still catching up with inflation. This year, says Laney, a continued high inflation rate could yield about 1 percent of real personal income growth.