Economic Outlook 2001

Hawaii Economic Association Annual Conference May 4, 2001

HEA Conference May 4, 2001 http://www2.hawaii.edu/~UHERO

Economic Outlook 2001

• 2000 Year in ReviewBusiness Cycle Expansion Accelerates

• 2001 Economic Outlook* US Economic expansion continues at slower pace

* Japanese Economy shows signs of weakening

* Hawai’i economic engine firing on all cylinders

HEA Conference May 4, 2001 http://www2.hawaii.edu/~UHERO

2000 Year in Review

• Visitor Industry Turns in a Banner Year* Eastbound Arrivals grow with Japanese Economy

* Westbound Arrivals growth not quite as strong as expected

* Room rates rise 6.3 %, Real Hotel tax base up more than 10%

1998 1999 2000Eastbound Visitors -11.3 -5.4 1.5Westbound Visitors 3.6 6.6 4.5Total Visitors -2.5 2.2 3.5

HEA Conference May 4, 2001 http://www2.hawaii.edu/~UHERO

2000 Year in Review

• Construction Sector leads expansion* Home Resales continue strong

* Permits growth slows

1998 1999 2000Real Contracting 2.7 -1.9 18.7SF Home Resales 23.2 14.3 11.5Total Permiting -10.5 24.0 12.6

HEA Conference May 4, 2001 http://www2.hawaii.edu/~UHERO

2000 Year in Review

• Job Growth Strongest in a Decade* Non Ag Job growth exceeds 3%

* Employment growth lower

* Unemployment below US average

1998 1999 2000 2001Q1Non Ag Jobs -0.1 0.7 3.1 2.9Employment 0.1 0.4 1.8 1.6Unemployment Rate 6.2 5.6 4.3 4.1

HEA Conference May 4, 2001 http://www2.hawaii.edu/~UHERO

2000 Year in Review

• Expanding Economy Grows Real Tax Base * Retail tax base grows with visitor industry and local

income.

* Hotels have a banner year.

* GE tax base expands more slowly than spending plans!

1998 1999 2000Retail -1.2 0.4 7.5Hotel Room -0.1 -0.5 10.2Total GE Tax Base -1.2 0.9 9.7

HEA Conference May 4, 2001 http://www2.hawaii.edu/~UHERO

2000 Year in Review

• Income Growth and Prices * Real income growth strongest in 11 years

* Inflation almost doubles

* Real income growth slower than job growth?

1998 1999 2000*CPI Inflation -0.3 1.0 1.8Real Income 2.2 1.5 2.9Real GSP 2.1 1.6 3.0

HEA Conference May 4, 2001 http://www2.hawaii.edu/~UHERO

Year 2001: Global Outlook

• US expansion continues at slower pace* Manufacturing sector in recession

* Alan and George both in the mood to contribute

* Real consumption expenditures up by 2% 2001Q1

• Japanese Economy- Some things Never Change!* Industrial production and business confidence slow.

* Consumer confidence and spending plans decline

HEA Conference May 4, 2001 http://www2.hawaii.edu/~UHERO

US Income Growth Slows Japan? Were Still Waiting

200220001998199619941992199019881986

8

6

4

2

0

-2

-4

US Japan

HEA Conference May 4, 2001 http://www2.hawaii.edu/~UHERO

2001 Outlook:All Sectors Contribute to Growth

• Visitor growth expected near 2%• Real contracting will expand by 9.7% • Job and Employment growth will continue• Real income to grow at 2.5%• Inflation will accelerate to 2.4%

HEA Conference May 4, 2001 http://www2.hawaii.edu/~UHERO

Visitor Arrivals Growth Moderates

200220001998199619941992199019881986

20

15

10

5

0

-5

-10

-15

Eastbound Westbound Total

HEA Conference May 4, 2001 http://www2.hawaii.edu/~UHERO

Expected Contracting Growth Strongest in 10 years

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30

20

10

0

-10

-20

-30

30

20

10

0

-10

-20

-30

Permits Real Contracting Tax Base (right scale)

HEA Conference May 4, 2001 http://www2.hawaii.edu/~UHERO

Labor Market Firms

200220001998199619941992199019881986

6

4

2

0

-2

-4

Jobs Employment

HEA Conference May 4, 2001 http://www2.hawaii.edu/~UHERO

Moderate Real Income Growth Continues

200220001998199619941992199019881986

6

4

2

0

-2

-4

Real Income Real Gross State Product

HEA Conference May 4, 2001 http://www2.hawaii.edu/~UHERO

Honolulu Inflation Still Playing Catch Up

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8

6

4

2

0

-2

Honolulu US

HEA Conference May 4, 2001 http://www2.hawaii.edu/~UHERO

2001 Outlook

2000 2001 2002Personal Income (Current $) 4.7 4.9 5.9Real Personal Income 2.9 2.5 3.1Real Gross State Product 3.0 2.6 3.2

Consumer Price Inflation 1.8 2.4 2.8

Visitor Arrivals 3.5 1.8 2.7East Bound 1.5 0.9 2.1West Bound 4.5 2.3 3.1

Real Contracting 18.7 9.7 5.1

Non Ag Jobs 3.1 2.6 2.6Employment 1.8 1.6 1.6