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The Honolulu Advertiser
Posted on: Saturday, May 20, 2006

Tourism slows, inflation rises

By Greg Wiles
Advertiser Staff Writer

Job growth, aided by construction work, surpassed state economists' expectations and helped push the jobless rate to 2.4 percent in January. This view is from the 19th floor of the new Ko'olani condos on Waimanu Street overlooking a building site next to Ward Centre.

DEBORAH BOOKER | The Honolulu Advertiser

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Hawai'i's economy remains on track for another year of solid growth, though there are signs tourism growth is slowing and inflation is rising, the state said yesterday.

The Department of Business Economic Development and Tourism revised parts of its 2006 economic forecast in reiterating its projection for the gross state product to advance 3 percent when adjusted for inflation. That compares to 2005's 3.8 percent rise.

"We're starting to see a slowdown, but it's still very solid growth," said Pearl Imada Iboshi, state economist.

The parts of the outlook, originally issued three months ago, were adjusted based upon Hawai'i's performance during the January-to-March quarter. Japanese tourist arrivals lagged expectations in the period, while inflation climbed faster than projected.

Higher-than-expected job growth surprised forecasters as Hawai'i's jobless rate dipped to a low for the quarter of 2.4 percent in January.

Japanese tourist arrivals have started the year slowly, hurt in part by a weaker yen-dollar exchange rate that made travel here more expensive than in the early part of 2005.

In February the state had forecast all arrivals, including those from the Mainland and foreign locales, would increase by 3.2 percent to 7.67 million this year.

It now is forecasting a 2.8 percent increase. Still, any rise over 2005's mark would mean a new record was set.

"We're now starting to get back to a normal and reasonable growth rate after several years of recovery," Imada Iboshi said, citing tourist arrival set backs earlier this decade because of the SARS scare and other difficulties.

She said inflation has been increasing because of rising rental housing prices and to a lesser extent the costs of fuel and transportation.

The projected rate of 3.8 percent compares to the national figure of 3.4 percent.

The increase caused the state to lower its forecast for personal income adjusted for inflation. The number of jobs is rising faster than the state anticipated, though, Imada Iboshi said.

Reach Greg Wiles at gwiles@honoluluadvertiser.com.

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