HONOLULU - "After four years of steady growth, the Great Recession has been left behind, and Hawaii has entered an expansionary phase of our business cycle," said economist Dr. Jack Suyderhoud at the recent First Hawaiian Bank Business Outlook Forum held in Honolulu.
"We forecast 2014 to be a continuation of what we have seen since 2010 - continued overall growth with strength in most sectors," said Suyderhoud, economic adviser to First Hawaiian Bank and professor of business economics at the University of Hawaii-Manoa.
However, he predicted a shift in the sources of growth:
"Tourism's torrid pace will taper, as the sector continues to grow but at a more moderate pace."
"Construction will pick up, adding jobs."
And, "State and local government will contribute to growth while federal spending will not."
Tourism: 4.8 percent growth in visitor arrivals for all of 2013 and 3 percent for 2014. "At over 8 million annual visitors, we are approaching capacity constraints in hotel rooms and airline seats. In addition, high airfares and room rates - plus a continued strong dollar relative to the yen, and Canadian and Australian dollars - all suggest that tourism's growth will moderate," he said. He predicted 6 percent growth in visitor spending this year, tapering to 5.3 percent in 2014.
Construction: "Double-double" digit growth in completed construction - 10 percent this year and 15 percent in 2014. "As tourism returns to less spectacular growth rates, construction will accelerate into 2014," he said. "Construction permit trends plus continued pent-up demand for housing will show up in robust, double-digit percentage increases in construction completed. In addition, healthier fiscal positions for the state and county governments mean that deferred maintenance and infrastructure renewal spending will also contribute to construction's growth. Finally, Honolulu's rail construction will show up in the data. All this will help bring back some of the 6,000 construction jobs that we have yet to recover from the Great Recession."
Labor market: Statewide job growth of 2.5 percent in 2013 and 2 percent next year, with unemployment dropping to 4.3 percent in 2014. "The return of more construction jobs will contribute to improvements in the overall Hawaii labor market" which, he said, has seen consistently positive trends since 2010.
Personal income: Expansion of 3.0 percent in 2014 which, Suyderhoud said, is "good news for retailers and home sellers, as Hawaii consumers will continue to spend. Since 2011, we have been reaching new highs in personal income, and we are well above pre-recession levels, even after adjusting for inflation."
Inflation: A slight uptick in inflation from 2.2 percent in 2013 to 2.8 percent next year. "Hawaii inflation is most affected by national price patterns, and there seems to be little fear of national inflation through 2014. However, higher housing and rental prices, along with higher wages in tighter labor markets, should be reflected in the Hawaii price data," he said.
In sum, happy prospects (with caveats).
"There is much to be happy about in tourism, incomes, jobs, retailing and real estate. Yet, not all sectors and islands have benefited equally from the rebound, creating a sense among some that the economy is less robust than it actually is," Suyderhoud concluded.
"Given what we have been through the last few years, these forecasts are happily optimistic," he said, but there are always "things that can go wrong," such as continuing dysfunction in Washington, D.C.; Federal Reserve policy changes going forward; the possibility of more struggles in the rollout for ObamaCare; and Middle East worries.
"We have all heard the anecdotal evidence of how sequestration and the recent shutdown have impacted Hawaii. However, we await the data to see how the overall economy has been impacted," he said.
"That said, and hoping for the best out of Washington, I believe that 2014 will be a good year for Hawaii's economy."