Posted on: Friday, June 3, 2005

UH raises forecast for state economy

By Tara Godvin
Associated Press

University of Hawai'i economists have revised their forecast for the state's economy upward for 2005, but the pace of growth is expected to slow next year.

The quarterly report from Carl Bonham and Byron Gangnes of the UH Economic Research Organization said the state's visitor arrivals, employment and income growth are expected to be higher than earlier predicted for the fiscal year ending June 30.

Visitor arrivals likely will exceed 7 million this year for the first time, according to the report.

With hotel occupancy in the state nearing the highest levels since 1986, the economists project an 8.4 percent increase in visitors from Japan and a 6.4 percent increase in U.S. arrivals for this year. That pace is forecast to slow next year to a 3.6 percent increase for Japanese arrivals and 0.9 percent rise for U.S. visitors.

Home prices remain high, however, and "sales volume and residential construction activity will begin to cool in the face of declining affordability and expected higher interest rates," the report said.

Payroll jobs are predicted to grow 2.2 percent this year, slowing next year to 1.6 percent, the report said. The economists say the state's current unemployment rate of 2.8 percent should hold over the next two years before it begins edging up.

The inflation rate, which was 3.3 percent last year, is forecast to rise to 4.0 percent this year before edging down to 3.6 percent in 2006.

While the pace of economic growth is expected to ease going forward, no dramatic slowdown is in the forecast.