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Products: Forecasts

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Hawaii Economic Forecast Update:
Inflation Shock Means Sharply Lower “Real” Growth

 Inflation in Hawai‘i has reared its ugly head. For the first half of the year, Honolulu consumer price inflation topped the nation, with average prices rising nearly 6% over the previous year. Rising prices are cutting into the purchasing power of local residents and will lead to a sharp drop in measured real income growth this year. While an orderly process of economic slowing continues to be evident, the inflation impulse introduces some new risks.

forecast Summary


County Economic Forecast:
Slowing Evident in County Economies

Economic conditions were buoyant in each of Hawai‘i’s four counties in 2005, but with some evidence that tight labor markets are beginning to act as a brake. The county economies will experience moderate growth in jobs and income this year, followed by further deceleration over the next year.

forecast Summary


Hawaii Economic Forecast Update:
Economy Strong, But Signs of Slowing Emerge

Prospects for the Hawai‘i economy continue to look very good for 2006. A relatively weak first quarter and limited airline capacity through the summer lead us to lower our visitor forecast slightly. At the same time, 2005 job growth has been revised upward and that strength has carried over into 2006. As expected, there are now signs that slowing has begun to occur, particularly in neighbor island economies. In the face of a very tight labor market, further slowing is expected to continue over the next year.

forecast Summary


Construction Forecast:
Growth to Slow as Housing Market Cools

UHERO’s construction forecast sees a gradual deceleration of growth over the next few years. Because of declining affordability, rising construction costs, and anticipated interest rate increases, the residential housing market will continue the cooling trend that has been apparent in recent months. Military and commercial construction will be stabilizing factors.

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Annual Hawaii Economic Forecast:
Long Expansion to Continue

Hawai‘i is coming off an exceptional year, one that will be tough to match. Tourism set new records and the construction industry added jobs at a fast clip. State tax revenues ballooned. Looking ahead, external conditions remain generally favorable, and growth in local jobs and personal income provides a sound foundation for continued spending. Considering limits posed by tight labor markets and high occupancy rates, growth is expected to continue at a more measured pace than we saw in 2004 and 2005.

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Global Economic Forecast:
World Economy Weathering Oil Price Shock

Global expansion continues, but at a slower pace than a year ago. High oil prices are an important part of the story, but so too is anemic consumer spending in Europe and Japan, as well as weak investment demand globally. As we expected, the global business cycle peaked in 2004, cooling somewhat this year. Moderate expansion is expected to continue for the next several years. Among risks to the outlook are widening global imbalances and the possibility of a global flu pandemic.

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Hawaii Economic Forecast Update:
Surging Economy Generates Impressive Income Growth

Any signs of cooling evident in second quarter data disappeared in the third quarter. Tourism rebounded and personal income was revised upward. The residential construction sector continues to perform at an exceptionally high level. While we expect the economy to slow a little in the fourth quarter, we now forecast real income growth of 4.3% for 2005. The strong growth is expected to generate some additional inflation over the next two years.

forecast Summary


Construction Forecast Update:
Tremendous Strength as Cycle Peak Approaches

This forecast update sees continued growth in the seven-year construction cycle. As affordability declines, costs rise, and the macroeconomic environment becomes less supportive, we expect construction activity to approach its cyclical peak over the next several years.

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Hawaii Economic Forecast Update:
Growth On Track, But Oil Risks Real

There was some slowing of visitor arrivals growth in the second quarter, but the industry remains buoyant. Residential construction and allied sectors are seeing exceptional job and income gains. Aggregate real (inflationadjusted) income growth continues to surprise, leading us to upgrade once again our income forecast for 2005. At the same time, we may now be seeing early signs of the gradual slowing that we expect to occur over the next several years. Inflation in Hawai‘i has probably not yet peaked, and the continuing surge in energy prices raises the risk of a more pronounced slowdown for the local economy.

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County Economic Forecast:
Counties Share Strength and Concerns

The robust outlook for the state economy is shared to varying degrees by each of the four counties. The county economies will all experience healthy growth in jobs and income this year, followed by gradual deceleration in the face of very tight labor markets and other capacity constraints.

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Hawaii Economic Forecast Update:
2005 Growth Revised Upward

UHERO’s Hawai‘i forecast for 2005 has been revised upward. This reflects newly-available data for the fourth quarter of 2004 and the first quarter of 2005, as well as upward revisions by the U.S. Bureau of Economic Analysis to their 2004 state income figures. As a result, visitor arrivals, employment and income growth are now expected to be a bit stronger than the figures we reported in our March Annual Hawai‘i Forecast report. We continue to expect gradual slowing of the economy as capacity constraints begin to bite.

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Annual Hawaii Construction Forecast:
The Cycle is Alive and Well

From its trough in the late 90s Hawai‘i construction activity has grown for seven years. This report predicts that growth will continue, resulting in the longest uninterrupted expansion since the 1960s. Forty years ago, the impetus of newly-achieved Statehood and a dramatic decade of in-migration set the tone for Hawaii’s growth for the next half century. More modest growth in construction activity during the current expansion, along with uneven participation across residential, nonresidential, and public sector construction, has set the stage for a more prolonged expansion than in prior cycles. Still, the investment cycle is alive and well. The UHERO Annual Construction Forecast predicts continued growth and discusses the probability of a cyclical turning point further in the future.

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Annual Hawaii Economic Forecast:
Economy Poised for Another Banner Year

Hawai‘i is set for a continuation of last year’s robust growth. 2004 was a great year for the tourism industry; this year should be even better. Construction industry strength continues, even if the residential boom may be peaking. Job and income growth accelerated in the second half of last year, and further gains are likely in 2005, with some deceleration as we head into 2006.

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Global Economic Forecast:
World Outlook Good, But Oil and Deficits Are Worries

The global expansion is running up against the biggest energy price increases in many years. While nothing like 1970s stagflation is expected, high oil prices have slowed the economy moderately. The global business cycle will peak this year, but with healthy growth continuing in 2005. Unlike past business cycle expansions, China has joined the U.S. as an important engine for global growth.

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Hawai'i Economic Forecast Update:
Robust Growth and Inflation Will Continue in 2005

Hawai'i's economic prospects continue to look good. Both job and real income growth will finish the year with greater than 2% gains, and there is plenty of momentum heading into 2005. The Japanese visitor recovery has been a bit more attenuated than we expected a year ago, but U.S. mainland visitors have taken up any slack. While income growth in construction has been weaker than expected in the year's first half, we expect the industry to be a substantial support for growth over the next several years. Persistent high energy prices have taken a bit off performance this year and will continue to act as a drag on the economy. Over the next two years the economy will remain healthy, with a slowing of job growth as the expansion runs up against capacity constraints and a slower external environment.

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