UH economists forecast slowdown, 2.5 percent growth
By John Duchemin
Advertiser Staff Writer
Hawai'i's economic growth will slow in 2001, but the state could still outperform the struggling national economy, a new University of Hawai'i report predicts.
The outlook report by the UH Economic Research Organization predicts gross state product growth of 2.5 percent in 2001, adjusted for inflation. Strong construction growth will be a key driver, and employment, visitor arrivals and inflation will experience moderate growth, predicted the organization of UH economics professors who include Carl Bonham and James Mak.
The growth in most of those sectors will be lower than in 2000, the organization said. The UH forecast is also slightly less optimistic than a recent forecast by the state government, which predicted 2.8 percent real growth in 2001 for the gross state product, the total measure of goods and services produced in Hawai'i.
Still, the forecasters said Hawai'i is in a pretty good spot, especially given the Mainland economy's problems. The collapse of the dot.com stock bubble, rising oil prices, slow holiday retail sales, poor corporate earnings and a rash of layoffs are among the interconnecting factors that have the United States skirting a recession for the first time since the early 1990s.
"The Hawai'i economy entered 2001 in its best shape in more than a decade," the report said. "... In fact, Ha-
wai'i may very well outpace the U.S. during 2001 in both job and income growth. ... While the external environment has lost much of its momentum acquired in 1999 and 2000, local conditions have picked up quite a head of steam."
Among the UH predictions:
Construction contracting, adjusted for inflation, will grow 9.7 percent in 2001 and 5.1 percent in 2002. Those predictions are down from 18.7 percent growth in 2000. The report said strong O'ahu home resales, low mortgage rates and rising consumer confidence will spur demand for construction.
Bruce Coppa, executive director for construction interest group Pacific Resource Partnership, said UH's prediction fits what he sees but says people should remember construction is a volatile industry prone to ups and downs.
"The good news is, a lot of this construction growth is coming from private dollars we're seeing lots of new homes, commercial real estate, hotels, office towers," Coppa said. "My one concern is, it's still somewhat fragile going forward. Unlike in the past, we can't take government and private spending for granted."
Personal income, adjusted for inflation, will grow 2.5 percent in 2001 and 3.1 percent in 2002.
The consumer price index for Honolulu will increase 2.4 percent in 2001 and 2.8 percent in 2002.
Visitor arrivals will increase 1.8 percent in 2001 and 2.7 percent in 2002. Both numbers are slower than the 3.5 percent growth in 2000, but the external economic difficulties will not quell the positive trends that led to a record year last year, the economists predicted.
Jobs will increase 2.6 percent in both 2001 and 2002, while the number of people employed will go up 1.8 percent in 2001 and 1.6 percent in 2002. Job growth in excess of employment growth, a continuation of a recent trend, suggests that more people will hold multiple jobs, the report said.