ECONOMIC FORECASTS FOR NEXT FEW YEARS REMAIN UNCHANGED
News Release, November 19, 2019
HONOLULU—The Department of Business, Economic Development and Tourism (DBEDT) released its fourth quarter 2019 Statistical and Economic Report today. In the report, DBEDT raised its economic growth forecast for 2019 by one-tenth of a percentage point from the third quarter forecast to 1.2 percent and kept the growth rates for the next three years unchanged at a range between 1.2 and 1.3 percent.
DBEDT’s economic forecasts are based in part on the data from the U.S. Bureau of Economic Analysis (BEA). In its November 7, 2019 release, the BEA revised Hawaii’s economic growth rate for 2018 from 1 percent to 2.4 percent. The BEA also revised the 2017 growth rate from 1.6 percent to 2.3 percent.
In its release, the BEA also estimated that Hawaii’s economy grew by 0.8 percent, at an annual rate, in the second quarter of 2019. Combined with the first quarter growth rate of 1.8 percent, the first half of 2019 Hawaii’s economic growth rate was 1.3 percent. This growth rate is consistent with the projected 2019 growth rates in DBEDT’s previous reports.
“Hawaii’s labor market saw a 5.1% decrease in claims during the first 10 months of the year with fewer layoffs in 2019,” said DBEDT director Mike McCartney. “The positive news is our economy will continue growing at a steady but slow pace with our gross domestic product exceeding $100 billion in 2020 for the first time in our state’s history.”
The state general fund tax revenue increased 7.1 percent during the first three quarters of 2019. As a component of the general fund, the general excise tax revenue increased 6.1 percent during the same period. The annual average growth for the general fund during the past 20 years (1998-2018) was 4.5 percent.
In its November 2019 report, Blue Chip Economic Indicators (the consensus of 50 economic forecast organizations) lowered the U.S. economic growth rate for 2019 to 2.3 percent from 2.4 percent in August 2019 and kept the 2020 U.S. economic growth rate at 1.8 percent. According to the November report, most countries in the world will experience slower growth in 2019 and 2020.
“While the economy remains healthy, we face challenges going forward from softening in the visitor and construction industries; the main drivers of our economic growth in the past few years,” said State Economist Eugene Tian. “Year-to-date through September, total visitor spending was a negative 0.1 percent and value of private building permits decreased by 7.2 percent.”
Among the private building permits issued during the first nine months of 2019, the value of residential permits decreased by 21 percent while the value of commercial and industrial permits decreased by 38.9 percent. Although the value of additions and alterations permits increased by 17.2 percent, the overall value of permits could not offset the decrease in other two categories.
The total residential units permitted during the first nine months of 2019 decreased by 1,482 units or 36.6 percent.
Value of government contracts awarded also decreased by 70.4 percent during the first nine months of 2019, however, this may not indicate a decrease in government construction since government contracts usually takes multiple years to complete. The contracts awarded few years ago may still be in construction this year.
Statewide volume of home sales during the first three quarters of 2019, including the ones through multiple listing services and the ones by other means, increase 1.4 percent from the same period a year ago, with single family home sales increased 3.7 percent while condo sales decreased by 0.5 percent.
With the newly revised personal income data by the BEA, Hawaii personal income increased 3.7 percent during the first half of 2019, lower than the growth rate of the same period in 2018 at 3.9 percent. Hawaii’s unemployment rate (not seasonally adjusted) averaged 2.8 percent during the first 9 months of 2019, 0.4 percentage higher than the same period a year ago. The average unemployment rate during the past 20 years (2008-2018) was 4.4 percent.
Given the above developments in the economy, DBEDT kept its economic growth projection for Hawaii basically unchanged from the previous quarter forecast at 1.2 percent for 2019 and 2020 and 1.3 percent for the next two years. The 2019 economic growth projection of 1.2 percent was an update from 1.1 percent in last quarter due to the improvement in the visitor industry.
DBEDT projects that visitor arrivals will increase by 5.7 percent for 2019 to 10.5 million visitors. This is higher than the previous projection of 3.5 percent given that visitor arrivals grew 5.7 percent and expenditures decreased 0.1 percent during the first nine months of 2019 and air seats are forecast to grow by 2.9 percent in 2019. Visitor expenditures are forecasted to increase 0.9 percent in this current projection instead of decrease by 0.2 percent as projected in the previous quarter.
Both visitor arrivals and expenditures are forecast to increase between 1.5 percent to 2.5 percent for the next few years, which is higher than previously projected, due to the changing in market shares between international and domestic visitors.
The forecasts for nominal personal income and real personal income growths were both revised upward due to the upward revisions by the BEA. Projection for payroll job growth was unchanged at 0.4 percent for 2019 and at the similar growth rate for the next few years.
The forecast for consumer inflation, as measured by Honolulu consumer price index, (CPI-U) was also unchanged at 2 percent for 2019 and increase to 2.5 percent by 2022.
The DBEDT Quarterly Statistical and Economic Report contains 136 tables of the most recent quarterly data on Hawaii’s economy as well as explanations of the trends in these data.
The full report is available here.
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Background: BEA: Hawaii Economic Growth Slowest in USA
HPR: State Economist: Challenges Ahead As Visitor, Construction Sectors Soften
PBN: State economic forecast shows little movement in Q4