Visitor arrivals to exceed forecast

By Sean Hao
Advertiser Staff Writer

Visitor arrivals will exceed initial state expectations this year, leading to a better-than-expected rise in income and jobs, state economists predicted yesterday.

The latest Department of Business, Economic Development and Tourism report on the economy also noted that the stronger economy will lead to rising inflation that could erode some of the growth in personal income.

The updated forecast released yesterday predicts 7 percent growth in visitor arrivals this year. The agency's previous report issued in March predicted only a 5.2 percent growth in visitor arrivals.

"The real news is that our visitor industry has exceeded all expectations, including both arrivals and daily spending," said DBEDT director Ted Liu, in a statement issued with the Quarterly Statistical and Economic Report. "With the rebound in tourism and robust construction activity our state is seeing its strongest economic performance in years."

That growth has brought with it a higher than expected increase in the cost of living with DBEDT now expecting the Honolulu Consumer Price Index to rise 2.5 percent this year, compared with its prior forecast of 2.2 percent. Earlier this week the Bureau of Labor Statistics reported 3.3 percent increase in inflation on O'ahu during the first half of this year.

Total wage and salary jobs are expected to rise by 2.1 percent, compared with March's forecast of 1.5 percent.

Personal income is now expected to rise 5.5 percent this year. In March the forecast for personal income was an increase of 5 percent. Inflation takes a bite out of that. Inflation-adjusted personal income is projected to rise by only 2.9 percent. That's slightly better than the March forecast for inflation-adjusted personal income, which was 2.8 percent.

The state's economy as a whole, as measured by real gross state product, is expected to grow 2.6 percent this year, which is level with the March estimate.

Beyond 2004, DBEDT is predicting economic growth to continue but at a slightly slower rate of 2.3 percent growth in real gross state product next year to a 2.2 percent in 2006.

Job growth and visitor arrivals also are expected to slow in 2005 and 2006.

Reach Sean Hao at shao@honoluluadvertiser.com or 525-8093.