economic outlook 2000-01 2000 efficient electro-technology conference september 7, 2000

Economic Outlook 2000-01

2000 Efficient Electro-Technology ConferenceSeptember 7, 2000

UHERO Quarterly Economic Outlook http://www2.hawaii.edu/~UHERO

Economic Outlook 2000-01

• 2000 Year to Date * Hawai‘i economic engine firing on all cylinders.

* Alan Greenspan—carrier pilot or miracle worker?

• 2000-01 Economic Outlook* US economy still leads world wide expansion.

* Hawaii’s economic strength causes wage and price inflation.

UHERO Quarterly Economic Outlook http://www2.hawaii.edu/~UHERO

2000 Year to Date: Hawai‘i Economy Roars Ahead

Visitor Industry Strong State Wide

1998 1999 2000ytdEastbound Visitors -10.9 -5.9 0.3Westbound Visitors 4.1 6.1 7.2Total Visitors -2.0 1.6 4.7Room Rates 2.9 1.3 8.2Occupancy Rate 1.6 0.8 5.6

UHERO Quarterly Economic Outlook http://www2.hawaii.edu/~UHERO

Honolulu County Visitor Statistics

20001999199819971996199519941993199219911990

115

110

105

100

95

90

90

85

80

75

70

OCCUPANCY RATE (right scale) ROOM RATE

UHERO Quarterly Economic Outlook http://www2.hawaii.edu/~UHERO

Maui County Visitor Statistics

20001999199819971996199519941993199219911990

180

170

160

150

140

130

120

85

80

75

70

65

60

OCCUPANCY RATE (right scale) ROOM RATE

UHERO Quarterly Economic Outlook http://www2.hawaii.edu/~UHERO

Hawai‘i County Visitor Statistics

20001999199819971996199519941993199219911990

180

160

140

120

100

72

70

68

66

64

62

60

58

56

OCCUPANCY RATE (right scale) ROOM RATE

UHERO Quarterly Economic Outlook http://www2.hawaii.edu/~UHERO

Kauai County Visitor Statistics

20001999199819971996199519941993199219911990

160

140

120

100

80

60

80

75

70

65

60

OCCUPANCY RATE (right scale) ROOM RATE

UHERO Quarterly Economic Outlook http://www2.hawaii.edu/~UHERO

2000 Year to Date: Hawai‘i Economy Roars Ahead

Construction Sector is HOT* Real contracting expands-- fastest rate in 10 years* Single family home and condo resales strong* Average home prices rise on Oahu.* Permits growth signals continued strength

1998 1999 2000ytdReal Contracting 2.5 -1.9 17.0Total Permiting -10.6 33.0 14.8SF Avg Price (Oahu) -2.9 1.9 5.6SF Home Resales 26.0 15.0 12.2Inventory (months) 10.4 7.4 5.9

UHERO Quarterly Economic Outlook http://www2.hawaii.edu/~UHERO

Honolulu County Construction Permits

200019991998

80

60

40

20

0

-20

-40

-60

-80

TOTAL ADDITION&ALTERATION COMMERCIAL RESIDENTIAL

UHERO Quarterly Economic Outlook http://www2.hawaii.edu/~UHERO

Maui County Construction Permits

200019991998

150

100

50

0

-50

TOTAL ADDITION&ALTERATION COMMERCIAL RESIDENTIAL

UHERO Quarterly Economic Outlook http://www2.hawaii.edu/~UHERO

Hawai‘i County Construction Permits

200019991998

150

100

50

0

-50

TOTAL ADDITION&ALTERATION COMMERCIAL RESIDENTIAL

UHERO Quarterly Economic Outlook http://www2.hawaii.edu/~UHERO

Kauai County Construction Permits

200019991998

100

50

0

-50

-100

TOTAL ADDITION&ALTERATION COMMERCIAL RESIDENTIAL

UHERO Quarterly Economic Outlook http://www2.hawaii.edu/~UHERO

Oahu Inventory Remaining

Source: Honolulu Board of Realtors

UHERO Quarterly Economic Outlook http://www2.hawaii.edu/~UHERO

2000 Year to Date: Hawai‘i Economy Roars Ahead

Job Growth Strongest in 10 years* Contracting and Oahu lead strong job growth

* Employment growth continues to exceed job growth

* Unemployment rate near US rate lower than CA

1998 1999 2000ytdNon Ag Jobs -0.1 0.5 2.0Employment 0.2 0.7 3.2Unemployment Rate 6.2 5.6 4.5

UHERO Quarterly Economic Outlook http://www2.hawaii.edu/~UHERO

Total County Job Growth

200019991998

4

3

2

1

0

-1

OAHU MAUI HAWAII KAUAI

UHERO Quarterly Economic Outlook http://www2.hawaii.edu/~UHERO

Honolulu County Job Growth Returns

200019991998

6

4

2

0

-2

-4

-6

NON-AG CONTRACTING SERVICE RETAIL HOTEL

UHERO Quarterly Economic Outlook http://www2.hawaii.edu/~UHERO

Maui County: Contracting Jobs Surge

200019991998

25

20

15

10

5

0

-5

NON-AG CONTRACTING SERVICE RETAIL HOTEL

UHERO Quarterly Economic Outlook http://www2.hawaii.edu/~UHERO

Hawai‘i County: Contracting Booming

200019991998

50

40

30

20

10

0

-10

NON-AG CONTRACTING SERVICE RETAIL HOTEL

UHERO Quarterly Economic Outlook http://www2.hawaii.edu/~UHERO

Kauai County: Growth in Retail & Hotels

200019991998

8

6

4

2

0

-2

-4

-6

-8

NON-AG CONTRACTING SERVICE RETAIL HOTEL

UHERO Quarterly Economic Outlook http://www2.hawaii.edu/~UHERO

County Unemployment Rates Decline

200019991998

10

9

8

7

6

5

4

3

OAHU MAUI HAWAII KAUAI

UHERO Quarterly Economic Outlook http://www2.hawaii.edu/~UHERO

2000 Year to Date: Hawai‘i Economy Roars Ahead

Expanding Economy Grows Real Tax Base

* Retail & Hotel tax base grow with visitor industry

* Wage income growing at over 6%

* GE tax base expanding more rapidly than income

1998 1999 2000ytdRetail -1.2 0.3 9.1Hotel Room -0.1 -0.6 12.2Contracting 2.7 -1.8 17.0Total GE Tax Base -1.2 0.8 10.3

UHERO Quarterly Economic Outlook http://www2.hawaii.edu/~UHERO

2000 Year to Date: Hawai‘i Economy Roars Ahead

Income Growth and Prices * Nominal income grew by more than 4% in Q1 while

wages grew by almost 9%.

* Inflation returns as expected

* Withholding Taxes increase more than 4%

1998 1999 2000ytdCPI Inflation -.3 1.1 1.8Real Income 2.7 2.2 2.6Witholding Taxes NA NA 4.5

UHERO Quarterly Economic Outlook http://www2.hawaii.edu/~UHERO

2000 Year to Date:Is the Landing Gear Down?

• US Energizer Bunny expansion continues to set records 112 months and still going strong

• Necessary ingredients for soft landing:* No mistakes by Fed!

* Continued productivity growth

* Slowing consumer demand (aka less than 20% annual return on Nasdaq!)

* Some easing of labor markets

UHERO Quarterly Economic Outlook http://www2.hawaii.edu/~UHERO

2000 Year to Date:Is the Landing Gear Down?

Soft landing pluses* CPI inflation only 3.5% through July.* Productivity up 5.1% over past year—biggest annual

gain in 17 years.* July housing starts declined to 1.51 million annual rate

lowest level since Nov. 1997.* US unemployment rate inched up in August to 4.1%* NAPM index declined in August—factory orders

posted largest decline ever in July, falling 7.5%.* Index of leading economic indicators down for third

straight month in July. * Sales of existing homes fell 9.8% in July (higher

mortgage rates).

UHERO Quarterly Economic Outlook http://www2.hawaii.edu/~UHERO

2000 Year to Date:Is the Landing Gear Down?

Soft landing minuses* CPI inflation 3.5% through July. * Real GDP grew at an annual rate of 5.3% in 2nd Qtr.* Industrial production is up 5.8% over last year through

June.* New orders for durable goods up 9.9% over last year.* Sales of new homes jumped 15% in July, the largest

increase in more than 7 years.

UHERO Quarterly Economic Outlook http://www2.hawaii.edu/~UHERO

2000-01 OutlookUS still Leads World Economic Growth

20012000199919981997

5

4

3

2

1

0

-1

-2

-3

World US Japan

UHERO Quarterly Economic Outlook http://www2.hawaii.edu/~UHERO

2000-01 NASDAQ Growth Forecast

UHERO Quarterly Economic Outlook http://www2.hawaii.edu/~UHERO

2000-01 Outlook:All Sectors Contribute to Growth

• Visitor growth expected near 5 %• Real contracting will expand at near 15 % rate• Job and employment growth continue at 2-3%• Real income to grow over 3%• Inflation will accelerate to 2.3% rate and beyond

with rising rents.

UHERO Quarterly Economic Outlook http://www2.hawaii.edu/~UHERO

Visitor Arrivals Growth to Remain Strong

2001200019991998199719961995199419931992199119901989

20

15

10

5

0

-5

-10

-15

Eastbound Westbound Total

UHERO Quarterly Economic Outlook http://www2.hawaii.edu/~UHERO

Expected Contracting Growth Strongest in 10 years

UHERO Quarterly Economic Outlook http://www2.hawaii.edu/~UHERO

Labor Market Firm—Shortages?

2001200019991998199719961995199419931992199119901989

6

4

2

0

-2

-4

Jobs Employment

UHERO Quarterly Economic Outlook http://www2.hawaii.edu/~UHERO

Real Income Growth Strengthens

2001200019991998199719961995199419931992199119901989

5

4

3

2

1

0

-1

-2

-3

Real Income Real Gross State Product

UHERO Quarterly Economic Outlook http://www2.hawaii.edu/~UHERO

Honolulu Inflation Catches US Rate

2001200019991998199719961995199419931992199119901989

8

6

4

2

0

-2

Honolulu US

UHERO Quarterly Economic Outlook http://www2.hawaii.edu/~UHERO

2000-01 Outlook

1998 1999 2000 2001Personal Income (Current $) 1.8 3.5 5.5 5.8Real Personal Income 2.1 2.4 3.3 3.0Real Gross State Product 2.2 2.4 3.0 3.1

Consumer Price Inflation -0.3 1.1 2.2 2.8

Visitor Arrivals -2 1.6 4.9 4.0East Bound -10.9 -5.9 0.9 2.4West Bound 4.1 6.1 7.0 4.8

Real Contracting 2.7 -1.9 15.0 10.0

Non Ag Jobs -0.1 0.5 2.0 2.2Employment 0.2 0.7 2.7 2.1