Hawai‘i’s economic outlook continues to look bright, according to the newest University of Hawai‘i Economic Research Organization (UHERO) report.
Tourism is pushing toward new records and the construction upswing is building in strength. The overall expansion remains solidly on track, delivering better labor market conditions and the prospect of further household income gains.
Still, in the midst of this hot and soggy summer we are pondering some ominous clouds forming out on the horizon.
Toursim Exceeds Last Year’s Performance
Despite high levels of capacity use on O‘ahu, the visitor industry continues to exceed last year’s performance and our expectations. Through the first seven months of the year, visitor arrivals, days and real spending are all up 3-4 percent, and visitor numbers will almost certainly end the year in record territory. This reflects a surge in activity on the Neighbor Islands, which has pushed hotel occupancy above 70 percent, even if this still lags pre-recession levels. (Data is from Hospitality Advisors LLC.)
While tighter conditions were expected to limit gains on O‘ahu, the county has kept pace with the Neighbor Islands, although weakness in the Japanese market has restrained spending.
Construction Activity Ramping Up
Construction activity is ramping up, although high variability and long delays in permit issuance continue to make it difficult to assess how far along we are in the current upswing. Through the first half of the year, the real (cost-adjusted) value of issued private construction permits was up more than 27 percent from the same period in 2014. Job growth has accelerated after a rather weak showing in 2014.
External Climate Has Become Less Hospitable
Recent tremors in the financial markets have highlighted concerns about pockets of weakness globally, particularly in China, and of risks when the Federal Reserve begins to raise interest rates in coming months. The fallout from such developments may have adverse impacts in Hawai‘i.