Hawai‘i isn’t in recession yet, BOH's Brewbaker says

While the state's economy is slowing, it is not in a recession, Bank of Hawaii Senior Vice President and Chief Economist Paul Brewbaker told HANO board members on May 28. “ I haven’t said recession yet,” he said, describing the bank’s latest economic forecast. “I got close to zero, but I never got negative.

Airline closures and cutbacks and a loss of passenger seats have affected Hawaii's tourist industry, but it's "not as big as 9/11," Brewbaker said. “Basically, we have no growth year to date in our primary export, tourism. We see a 4 percent increase in visitor spending offset by a 4 percent increase in the Consumer Price Index.”  For more on his economic forecasts, see the BOH Economics homepage, https://www.boh.com/econ.

Brewbaker said the state economy lost all of its forward momentum from the first half of the decade. He predicted the loss of airline seats won’t be made up until the second half of 2009. In the meantime, he predicted any recession would not be as deep as those in the past, but that the recovery would not be as strong, either. However, “I don’t have the train (the proposed Honolulu mass transit system) in my forecast,” he said.

How can nonprofits cope with the new economic realities? “Where are the risks to your income streams?” Brewbaker asked. “How are you dealing with rising costs, for energy for example? If your income streams are at risk and costs are vulnerable to commodity price increases, now is the time to take stock.” The objective should be to “deliver your objectives at minimum cost. Right now the supports may not be there while costs are going up – interisland air fares, for example.

Don’t over-react to soaring gasoline prices, Brewbaker warned. “We go from freak-out to freak-out,” he said. “But only 7 percent of Hawai‘i household incomes are spent on energy,” he said. “That’s about $200 per month for fuel out of an average $80,000 household income. If something doubles, it gets a headline. It’s like the Canadian visitor count,” he said.

Between 2008 and 2010, Brewbaker advises nonprofits to focus on their core businesses. “Get smaller. Build up a strong defensive posture – get lean and mean and strong. … It won’t be as bad as the 1990s.”

The recent slowing of the economy began last year. On June 5, Pacific Business News reported that Hawai‘i’ economic growth rate slowed to 3 percent in 2007, down from 4.3 percent in 2006 and 2005, according to estimates released by the U.S. Bureau of Economic Analysis. Hawaii's growth rate was seventh highest in the nation, tied with North Dakota. Nationally, real economic growth slowed to 2 percent from 3.1 percent in 2006, the BEA said.