Posted on: Tuesday, March 29, 2005

Personal income gets boost

By Sean Hao
Advertiser Staff Writer

Personal income for Hawai'i residents last year rose slightly higher than expected, helped by increases in earnings from rent, interest and a $3-a-share dividend from Microsoft Corp.

Inflation-adjusted personal income rose 3.5 percent, compared with a 2.3 percent increase in 2003, according to figures released yesterday by the U.S. Bureau of Economic Analysis.

The strong performance, which topped forecasts by local economists, also resulted from better-than-anticipated wage growth in areas such as lodging and food services, construction, information services and real estate.

"That's pretty darn respectable," said Carl Bonham, an economist at the University of Hawai'i-Manoa.

The figures appear to show residents continuing to stay ahead of inflation caused by rising energy and housing costs.

Part of that rise came from an increase in nonwage income, which had been a drag in recent years as interest rates have fallen. Additionally, Microsoft, which is among the most widely held stocks, returned $32 billion to investors in December, which boosted incomes nationwide.

"Interest rates have stopped falling, dividends have stopped falling and in the case of Microsoft they've gone up, and we know that rents are going up," Bonham said.

Also contributing to income growth was a 2.6 percent jump in jobs last year. However, income attributed to new jobs means that many Hawai'i residents didn't actually experience a 3.5 percent increase in purchasing power.

In addition, personal income growth would have been even stronger if not for an increase in the rate of inflation last year.

Among the rising costs faced by residents recently:

• The median price for an existing single-family homes on O'ahu last month rose to a record $525,000, which was 28 percent higher than a year earlier. Higher property values mean higher property taxes and insurance rates for all homeowners.

• The average price for a gallon of regular gasoline on O'ahu was around $2.34, according to a survey released yesterday by AAA travel club. That was up about 14 percent, or 30 cents a gallon, from a year ago. Rising crude oil costs result in higher gasoline prices, energy costs and shipping rates.

Higher prices for homes and oil are expected to persist, resulting in forecasts of more than 3 percent inflation this year. Hawai'i's economy is expected to remain strong with unemployment remaining relatively low and real incomes rising between 1.9 percent and 2.8 percent this year, according to local economists.

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