Business confidence 'sagging' in Hawai'i

By John Duchemin
Advertiser Staff Writer

Despite signs of resilience in Hawai'i's economy, more than half of respondents to a local business confidence survey said they expect economic activity to lessen during the next year.

About 52 percent of respondents expect an economic decline this year, while about 48 percent expect the economy will stay the same or improve, according to the findings of a Bank of Hawaii report released yesterday.

The survey results reflect the post-Sept. 11 economic shock, which has led to a dramatic decline in tourism, an apparent local and national recession, corporate losses and thousands of layoffs.

While the Hawai'i economy is proving somewhat more resilient than initially expected, Bank of Hawaii economist Paul Brewbaker said the survey shows that confidence of businesses is sagging, which could have a dampening effect on future hiring, capital investments and development.

"The bottom line is that we are seeing a shift from a more neutral expectation a year ago to a slightly less positive outlook," Brewbaker said. "...The recent survey results reflect another dip — similar to what we observed during the 1990s stagnation — when, just at the point business confidence was weakest, economic activity began to improve."

Brewbaker said last year's better-than-expected domestic visitor arrivals to the Islands and an annual increase in visitors from California are signs of "Hawai'i's true resilience." Nonetheless, he said businesses still believe times are bad.

But Brewbaker downplayed the link between sagging confidence and further economic decline. Businesses are unlikely to end projects, cancel investments or lay off employees because they think the economy may get worse, he said. Businesses tend to be more positive about their own prospects than the economy, he said.

"Calling off or postponing projects and investments can be very expensive, as can laying off employees," he said. "And who knows? The economy may get better or improve faster than you thought, and then you'd have to start all over again."

The January mail-in survey included responses from 425 businesses from all islands and many industries, but were skewed toward businesses in particular sectors. More than 40 percent of responses came from retailers and professional service firms; hotels made up 2.6 percent.

Still, about 33 percent said they expect higher sales in the next year, while only 30 percent expect lower sales. Again, this is because of business owners' tendency to be more optimistic about their own prospects, Brewbaker said.