UHERO: “Moderately strong growth” for Hawaii’s economy tied to international visitors
May 12, 2022 at 6:00 am HST
* Updated May 12, 4:01 am
Hawaii researchers expect “moderately strong growth” for Hawaii’s economy, buoyed by returning international visitors, in a new report.
The report released today says Hawaii’s tourism recovery bounced back quickly after the Omicron wave receded.
Visitor numbers will top 90% of pre-pandemic levels by the end of the year and actual visitor spending will be a third higher than last year, helped by the return of more spend-hungry international visitors.
However, inflation is the highest in decades and will weigh on economic growth until it returns to trend over the next two years.
Inflation in Hawaii reached 7.5% in March, as measured by the Honolulu CPI, only slightly lower than the US as a whole. It increased household expenses by an average of $3,600 and also increased firms’ production costs.
“Excluding the expected return of international visitors, we would be revising our forecasts downwards due to the combined impact of war, inflation, supply shortages and upcoming Fed rate hikes,” UHERO said in a press release. “While we believe the continued tourism recovery will offset these forces in Hawaii, they nonetheless pose an increasing recession risk.”
Other highlights of the report include:
- Homebuyers are being pressured by both soaring home prices and mortgage rates, which have risen more than 2 percentage points since last summer.
- After a pause in the second half of last year, the labor market has started to move slightly upwards again. Nonfarm payrolls in Hawaii will grow more than 4% this year and continue at a healthy pace in 2023.
- The potential for US and global growth has deteriorated since UHERO last forecast in March. Russia’s war in Ukraine has pushed up energy and commodity prices, while supply chains are once again threatened by COVID-19 shutdowns in China. The Federal Reserve is pursuing a rapid pace of monetary tightening in the face of the highest inflation in decades. These factors will dampen global growth over the next few years and significantly increase the risk of recession.
- Real personal income has fallen as the pandemic ended fiscal support, and inflation will also take its toll. Real income will fall 5% this year and recover less than 1% in 2023. Job gains and a tight labor market will support a return to moderate income growth through 2024. Real gross domestic product, the broadest measure of production, will increase by 3.5%. this year and is approaching its pre-COVID peak by mid-2024.
To view the report, visit UHERO’s website.