Economic outlook bright
By Sean Hao
Advertiser Staff Writer
Hawai'i's economic expansion, while showing signs of age, should continue for several years, according to a forecast released yesterday by First Hawaiian Bank consultant Leroy Laney.
The Hawai'i Pacific University economics professor predicted continued healthy growth in jobs, inflation-adjusted personal income and visitor arrivals through 2005. Laney said it was his most optimistic forecast for the state's economy in 15 years.
"Hawai'i's economy has continued its spectacular performance in 2004," Laney said at the bank's annual outlook forum. "The main contributing factors have been a hot housing market, a continued strong construction industry, healthy Mainland tourism and a welcome return of the Japanese visitor market."
Laney predicted the state economy will expand by 2.9 percent in 2005, up from 2.6 percent growth in 2004.
Other indicators of Hawai'i's strong economy include:
• A drop in bankruptcies for nine straight quarters. Total bankruptcies this year are expected to slightly top 3,000 — almost half a peak of nearly 6,000 in 1998.
• Strong new auto sales. This year's auto sales are expected to break last year's record of 69,000 vehicles.
• Tax revenues growth. General excise tax revenues — a barometer for economic activity — are expected to exceed $2 billion, compared with $1.8 billion last year.
• Single-family home sales this year are forecast to top 4,800 units this year, versus 4,400 last year.
One byproduct of such strong growth is inflation, which during the first half of this year rose 3.3 percent — the highest level since 1992. Soaring housing and energy costs, created by a rise in crude oil prices, were factors behind the rise.
Laney predicts a 3.4 percent rise in the cost of living this year, followed by a 3.7 percent increase in 2005. Despite those increases, real personal income should grow 2.8 percent this year followed by 3.1 percent next year, Laney said.
Going forward, there's nothing to indicate a slowdown looming for Hawai'i's economy, Laney added.
"I guess if you've got enough imagination you could think of several things that could" slow economic growth, he said. "So what could drag us to a loss? Recession in our two major markets for tourism — Japan or the United States.
"I think we've proven here that as far as Japan is concerned, we can survive that. A brief U.S. recession probably would not be a big hit."
In addition, an acceleration of crude oil or housing prices could pose risks for the state's economy, he said.
"But I don't see any of those things frankly looming on the horizon," Laney said. "We've had some good times here and I think we'll continue to see that, perhaps not at the same rate of increase as we go out two to three years, but we'll still have some pretty good times here."
Reach Sean Hao at 525-8093. or shao@honoluluadvertiser.com.
