Posted on: Wednesday, June 22, 2005

Tamer growth in economy expected

By Sean Hao
Advertiser Staff Writer

Hawai'i's booming economy will begin to moderate next year, according to a forecast released yesterday by the University of Hawai'i Economic Research Organization.

The findings are in line with previous predictions by the UH economists, who quickly added that the state's four counties will continue to grow economically, but at a slower pace.

"The big story here is really how good the outlook is," said Carl Bonham, an economist at the University of Hawai'i-Manoa.

But, "it tends to foretell that we're probably reaching a peak," Bonham said. "However, we're not predicting a turning point.

"The turning point is not something we're likely to see very well."

The difference in growth rates should be unnoticeable, but does indicate that maintaining economic momentum becomes more difficult amid tight labor markets, a return to normal tourism growth rates and higher interest rates, the UH economists said.

Economic growth next year will remain respectable with gains in real personal income ranging from 2.3 percent on O'ahu and Maui to 2.4 percent growth on Kaua'i and a 2.5 percent increase on the Big Island. That compares with this year's forecast of income growth rates of 2.8 percent in Honolulu, 3.3 percent on Maui, 3.5 percent on Kaua'i and 3.6 percent on the Big Island. Job growth among the counties also is expected to temper next year following a robust 2005.

Overall, Hawai'i's economy continues to hinge on visitor arrival growth. The state has forecast arrivals will reach a record 7.3 million for all of 2005, however, growth is expected to slow from a 5.1 percent increase this year to 2.7 percent rise next year.

Barring an external shock to the state's economy such as a U.S.- or global economic downturn or natural disaster there's no sign of an economic downturn. Otherwise "we continue to bounce around here ... then the cycle ends on its own because of rising prices" for housing and labor. "Rising prices tend to slow an economy. Essentially, people stop spending," Bonham said.

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