State's economic diagnosis mixed
By Glenn Scott
Advertiser Staff Writer
With pressure from a slowing Mainland economy and a weakening yen, a monthly predictor of Hawai'i's future economic activity continued its downward slide in the latest summary issued yesterday.
The Leading Economic Indicator prepared by the state Department of Business, Economic Development & Tourism showed mixed signals for January, the last month for which figures are available. But the overall signal from the diagnostic measure suggested that the state's economy will experience more slowing toward the end of this year.
The indicator is based on 10 measures of economic performance, five inside the state and five outside. Five measures were down, with the trade-weighted exchange rate — a reflection of the yen's rising cost against the dollar — exerting the strongest tug. A weak yen affects the buying power of Japanese tourists.
Other downward pressure came from the national leading index, a common measure of U.S. economic performance, and dropping construction permit values in Hawai'i.
Four of the five measures showing gains reflected business activity inside the state. Among them was a gain in the number of work hours and a rise in residential real estate prices. Also growing were Japanese labor earnings, reflecting an increased potential for travel.
The number of O'ahu real estate sales and a drop in unemployment claims also showed slight gains for the local economy, according to state measurements.
The January report parallels other predictions from public- and private-sector economists and business leaders, who say the state is likely to feel more effects from the national slowdown in months to come. However, if efforts succeed to prime the U.S. economy through tax cuts and lowering interest rates, officials such as Seiji Naya, director of the state's research agency, say Hawai'i might avoid a more extreme downcycle locally.
Naya said yesterday the state's indicator offers a bit of hope.
"The fact that half of the components rose while half fell hints that the direction may reverse in the next few months," he said.
