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Key Changes in This Forecast.
We have revised our forecast for Japanese visitor arrivals
due to a sharp recovery in travel after the initial H1N1 scare.
Total visitor arrivals are expected to fall by 4.4% compared with
our June forecast of a 6.8% drop.
We now expect a nearly half-percent drop in average consumer
prices this year, compared with the half-percent increase forecast
Real income this year will fall by just over 1%, compared
with a 2.7% drop anticipated back in June, and there will be only
a very small net loss in 2010.
Things are looking up for the U.S. and global economies.
Japan returned to growth in the second quarter, and it appears
likely that the US will post positive growth for the current
quarter. It is harder to find evidence of a turnaround in the
Hawai'i economy, although we expect recovery to begin by early
next year. A technical recovery will not mean a rapid return to
economic health. Because of anticipated weak US and Japanese
consumer spending and the drag from continuing State fiscal
problems, the local economy will take a number of years to fully
The number of visitors appears to have stabilized near the
2002-2003 level. However, visitor spending continues to decline
because of widespread discounting. Visitor expenditures will fall
more than 12% this year, climbing close to 2% in 2010.
Japanese visitor arrivals recovered more quickly than
expected from the H1N1 scare. Arrivals for 2009 will be just
4.1% lower than their 2008 level, compared with our June forecast
of -13.8%. Similarly, international arrivals from other
countries will fall by 9.5%, compared with a forecast of -13.9%
back in June. Next year, we expect a very measured recovery to
begin in these markets, with Japanese arrivals rising 3.3% and
other markets by 5.6%.
The US market performance is tracking our expectations
closely. We expect 2009 US arrivals to be 3.3% lower than last
year, nearly identical to our June forecast. We have increased
just a bit our forecast for 2010, to nearly 3% growth for the
Visitor industry recovery will be slow, held back by
cautious consumers in the US and Japan. The hotel occupancy rate
will average an abysmal 66.1% this year and will remain below
70% until the end of 2011.
August's 3.6% decline in non-farm payroll jobs shows that
the pace of job losses has not abated. Nonfarm employment fell
below 600,000 in August for the first time since February 2005. We
continue to estimate a 3% payroll job loss this year. Job losses
will end by early 2010, but the average job count in 2010 will
still be eight-tenths of a percent lower than this year. The
unemployment rate stabilized over the summer in the 7.0-7.4%
range, but we expect a further rise to an average rate of 8.1% in
Honolulu inflation was nearly nonexistent in the year's
first half, primarily because of low energy prices and stable
rents. We now expect a nearly half-percent drop in average
consumer prices for 2009 as a whole, compared with the
half-percent rise forecast back in June. We continue to expect
very modest inflation for the next several years, as slack demand
and lower rents feed through into prices. A further upward spike
in oil prices could send inflation higher.
We have revised upward our estimate for real
(inflation-adjusted) income this year and next. Real income this
year will fall by just over 1%, compared with a 2.7% drop
anticipated back in June, and there will be only a very small net
loss in 2010. This upward revision is due to smaller projected
private sector losses, the delay in implementing State worker
furloughs, stronger transfer payment income, and the stock market
run-up, which has improved prospects for dividend income. The
lower inflation forecast also plays a role.
State fiscal problems will temper income and employment
gains as the economy claws its way back to life over the next two
years. As a result, unemployment will remain relatively high for
a number of years, income gains will be hard to come by, and
economic conditions will remain difficult for many families.
Recovery means a return to growth, not a return to business as
Copyright © 2009 UHERO. All Rights Reserved.
Upcoming UHERO Forecast Reports
The following are reports scheduled for delivery to sponsors in the coming months. Brief executive summaries will be released to the public.
4th Quarter: Next Quarterly Hawai'i Economic Forecast Update.
4th Quarter: Global Economic Forecast. Review of economic
conditions in the world economy with particular focus on Asia.