Hawaii economic outlook for 2014

Hawaii economic outlook for 2014
a presentation for the
CCIM/IREM/BOMA Forecast 2014
Hawaii Convention Center
prepared by
by Paul H. Brewbaker, Ph.D.
TZ Economics, Kailua, Hawaii
January 22, 2014
Copyright 2014
Paul H. Brewbaker, Ph.D.
Actual and forecast General Fund revenue growth
20
Actual
15
Percent change
Jan. 2014 forecast
10
5
0
You are
here
-5
-10
U.S. recessions shaded
-15
2000
2005
2010
2015
2020
Slide copyright 2014
Source: Hawaii Department of Taxation (http://www.state.hi.us/tax/a9_1cor.htm)
1
Quarterly, million 2012$ (s.a., log scale)
Constant-dollar Hawaii general fund revenues actually
have declined for 5 quarters recently (1 outlier)
1600
Lehman
1400
1200
Tohoku
1000
SARS
ERTF
9/11
Refund lag
U.S. recessions shaded
800
2000
2005
2010
2015
Slide copyright 2014
Sources:
Hawaii Department of Taxation, Hawaii Department of Business, Economic Development and Tourism, Bureau of Labor Statistics;
seasonal adjustment and deflation by TZ Economics
2
Sources of momentum loss during 2013
1. Federal contraction—sequestration, shutdown—took up where State govt. left off
2. Tourism was declining for most of 2013: no more room(s)
3. Homebuilding did not break out of its low-level equilibrium trap: no can
4. Construction spending was declining for most of 2013: PV panels are not buildings
Slide copyright 2014
3
Compound annual growth of real U.S. GDP government
components highlight shifting sources of fiscal drag
Expansion
to-date
First 2 years
09Q2-11Q2
Second 2 years
11Q2-13Q3
2.3
2.25
2.36
Government
-1.5
-1.5
-1.4
Federal
National defense
Nondefense
State and local
-1.1
-2.1
0.7
-1.7
1.1
0.8
1.8
-3.3
-3.0
-4.5
-0.3
-0.3
GDP
Hawaii math: 0.25 of economy (public sector) is growing −1.5% per annum
0.75 of economy (private sector) is growing +3.5%
Overall economy grows 2.25%
Note: Hawaii federal employment declined 3.9% between year ending in September 2012 and the September-November
2013 quarter, seasonally-adjusted
Slide copyright 2014
Source: Bureau of Economic Analysis, U.S. Department of Commerce
4
Hawaii value-added (GDP) shares in federal govt.
and tourism: combined 1/3 of the economy
State and local
8.9%
Tourism
14.8%
Federal military
9.6%
Federal civilian
5.8%
2010
Federal vs.
local
Private industry
75.6%
2010
Tourism vs.
Non-tourism
(17-18% 2013)
Non-tourism
85.2%
References:
DBEDT State of Hawaii Data Book (http://hawaii.gov/dbedt/info/economic/databook/2010-individual/07/073410.xls)
James Hosek, Aviva Litovitz, Adam C. Resnick, 2011 “How Much Does Military Spending Add to Hawaii’s Economy?” Rand Corporation Technical
Report TR-996 (http://www.rand.org/pubs/technical_reports/TR996.html); note that this report incorrectly doubles the military share of Hawaii
GDP to inflate its “association” with other industries using input-output multipliers, which is like doubling everything.
James Mak, 2005. “Tourism demand and output in the U.S. Tourism Satellite Accounts: 1998-2003,” Journal of Travel Research, 44 (1), pp. 4-5
Eugene Tian, James Mak, and PingSun Leung, “The direct and indirect contributions of tourism to regional GDP: Hawaii,“ UHERO Working Paper
No. 2011-5 (July 28, 2011) (http://www.uhero.hawaii.edu/assets/WP_2011-5.pdf)
Slide copyright 2014
Source for underlying data: Bureau of Economic Analysis, U.S. Department of Commerce, Hawaii DBEDT, Hawaii Tourism Authority; all
calculations by TZE
5
Seasonally-adjusted statewide visitor arrivals
declined on trend after fourth quarter 2012
P
Monthly in thousands, s.a. (log scale)
750
T
U.S. recession
shaded
700
Down is the new up?
(Déjà vu 2005-2007)
650
Aloha
shutdown
600
Lift
Tohoku
550
500
H1N1-A
450
04
05
06
07
08
09
10
11
12
13
14
Slide copyright 2014
Source: Raw monthly data through November 2013 from HTA, Hawaii DBEDT; seasonal adjustment using Census X-12 ARIMA filter by TZE
6
Statewide total visitor days (s.a.): growth faded
P
Monthly in millions, .s.a. (log scale)
6.5
T
U.S. recession
shaded
Déjà vu 2005-2007
6.0
Aloha
shutdown
5.5
Lift
Tohoku
5.0
H1N1-A
4.5
04
05
06
07
08
09
10
11
12
13
14
Slide copyright 2014
Source: Raw monthly data through November 2013 from HTA, Hawaii DBEDT; seasonal adjustment using Census X-12 ARIMA filter by TZE
7
Total seats to Hawaii through November 2013 (s.a.):
following two pushes (2010, 2012) capacity flattened
P
Monthly in thousands, s.a. (log scale)
950
T
U.S. recession shaded
900
Déjà vu 2005-2007
850
800
No Aloha
Tohoku
750
700
650
04
05
06
07
08
09
10
11
12
13
14
Slide copyright 2014
Source: Data through November 2013 from HTA, Hawaii DBEDT; seasonal adjustment by TZE
8
Real Hawaii visitor expenditure (s.a.) through 2013Q3:
down is not the new up
Monthly in billion 2012$, s.a. (log scale)
4.5
U.S. recessions shaded
4.0
Aloha
shutdown
3.5
Déjà vu 2005-2007
SARS
3.0
Tohoku
2.5
9/11
H1N1-A
2.0
2002
2004
2006
2008
2010
2012
Slide copyright 2014
Sources: Hawaii Tourism Authority, Hawaii DBEDT, Bureau of Labor Statistics; deflation calculations by TZE
9
Visitors/room: past 2.5 “sold out”—visitor days
outstrip capacity to accommodate growth (literally)
3.0
E
Visitors / unit
2.5
2.5 persons/unit
2.0
1.5
1.0
0.5
1950
1960
1970
1980
1990
2000
2010
E estimated based on January-October 2013 data
Slide copyright 2014
Sources: Hawaii Visitors Bureau, Hawaii Tourism, Authority Hawaii DBEDT; visitors/unit is calculated by dividing total visitor days by the previous
year’s visitor plant inventory, and dividing the resulting ratio by 365.25 (days/year), data are annual except for 2013 estimate (10-mos. data).
10
Rising hotel occupancy rate driving faster and
faster real hotel room rate appreciation, over time*
Real room rate appreciation (%)
15
2009-2013
10
2000-2008
5
1978-1999
0
*Each tourism cycle, for
a given rise in hotel
occupancy, real room
rates appreciate faster
than before because
new accommodation
supply is constrained
by regulatory barriers
-5
-10
-15
60
65
70
75
80
85
Occupancy rate (%)
Slide copyright 2014
Sources: Raw data from PKF Hawaii and Joseph Toy, Hospitality Advisors LLC; UHERO; deflation, vacancy rates, and regressions by TZE
11
The (Mike) Sklarz Curve: Oahu home price
appreciation, lagged inventory remaining 1994-2013
Home price appreciation (%)
40
30
Single-family
Condominium
20
@ < 3 months of
inventory remaining,
prediction is >10%
appreciation before next
summer
10
0
-10
-20
-30
0
5
10
15
20
25
30
Months of MLS inventory remaining (-5)
Slide copyright 2014
Source: Honolulu Board of Realtors; seasonal adjustment, regressions on logs of months of inventory remaining by TZE; see Norm Miller and Mike
Sklarz, “A Note on Leading Indicators of House Price Trends,” Journal of Real Estate Research 1:1 (Fall 1986) pp. 99-109
12
Thousand dollars, s.a. (log scale)
Monthly Oahu median existing home sales prices:
moment to build into affordability “window” passed
800
+2 years: $850k (SF)
Single-family
Condominium
+2 years:$450k (Condo)
400
200
Recessions shaded
100
1995
2000
2005
2010
2015
Slide copyright 2014
Source: Honolulu Board of Realtors (raw data through December 2013); seasonal adjustment and trend filtering by TZE, projections are forecasts
from a second-order polynomial regression on the natural log of the Hodrick-Prescott filter trend of monthly home prices, s.a., 2010-2013.
13
California, Neighbor Island existing single-family
home median sales prices: strong co-movement
Quarterly in thousand $, s.a. (log scale)
800
U.S. recessions shaded
Cross-correlation
90% and up
400
SF Bay Area
Orange Co., CA
Maui
Kauai
Kona side
200
1995
2000
2005
2010
2015
Slide copyright 2014
Sources: Hawaii Information Service, Realtors Association of Maui, National Association of Realtors; seasonal adjustment by TZE
14
Thousand units/quarter, s.a. (log scale)
Hawaii existing home sales outpace new residential
units permitted (especially slow Neighbor Isle recovery)
6.4
3.2
Existing home sales
New units authorized
1.6
0.8
U.S. recessions shaded
0.4
80
85
90
95
00
05
10
15
20
Slide copyright 2014
Source: Prudential Locations, UHERO, County Building Departments, Hawaii DBEDT and TZ Economics; seasonal adjustment, trend extraction by
TZE, housing unit authorization data through third quarter 2013, existing home sales through second quarter 2013
15
Hawaii now: population growth > housing formation
10.0
8.0
10.0
Housing growth
rate (%) (ΔKt/Kt-1)
8.0
6.0
Housing growth
rate (%) (ΔKt/Kt-1)
6.0
4.0
4.0
2000s “boom”
2.0
o
2000s “boom”
P
0.0
2.0
0.0
Population
growth rate (%)
-2.0
Population
growth rate (%)
-2.0
-4.0
-4.0
1930s
1950s
1970s
Oahu
oMilitary
downsizing (BRAC)
PProjection
1990s
2010-12
1930s
1950s
1970s
1990s
2010-12
Neighbor Islands
to 2020 including Koa Ridge, Ho’opili, Kakaako; assumes housing cycle tapers after 2017 (Appendix 3).
Slide copyright 2014
Sources: Robert C. Schmitt Historical Statistics of Hawaii, Hawaii DBEDT (http://dbedt.hawaii.gov/economic/county_report/), Bank of
Hawaii Annual Economic Report (various), annual TZE data through 2012
16
Statewide annualized homebuilding: if not between
3,500−11,300 units / annum, not even interesting
Thousand units (log scale)
16
11,300
8
4
3,500
2
1980
1985
1990
1995
2000
2005
2010
2015
2020
Slide copyright 2014
Sources: Cumulative 4-quarter totals of seasonally-adjusted data through third quarter 2013, from data illustrated in next slide.
17
Quarterly new housing units authorized by building
permit: Oahu recovery missing Neighbor Isles
Units, s.a. (log scale)
3.2
3.2
1.6
1.6
0.8
0.8
0.4
0.4
0.2
0.2
1975 1980 1985 1990 1995 2000 2005 2010 2015 2020
1980 1985 1990 1995 2000 2005 2010 2015 2020
Oahu (with U.S. recessions)
Lehman
Brothers
Neighbor Islands (with Lehman)
Slide copyright 2014
Sources: County building departments, Hawaii DBEDT, quarterly TZE data through third quarter 2013; seasonal adjustment and trend extraction by
TZE
18
New housing units authorized by building permit at
historic, post-WWII lows including “condo-mania”*
14
Thousand new units/annum
12
Oahu
Neighbor Isles
10
8
6
WWII
4
2
0
20
30
40
50
60
70
80
90
00
10
20
*Andrew W. Gomes, “CONDO-MANIA!” Honolulu Star-Advertiser (June 3, 2013), page A-1.
Slide copyright 2014
Sources: Robert C. Schmitt Historical Statistics of Hawaii, Hawaii DBEDT (http://dbedt.hawaii.gov/economic/county_report/), Bank of Hawaii
Annual Economic Report (various); annual TZE data through 2012
19
Real Hawaii contracting receipts
trending downward since mid-2012
Million 2012$, s.a. (log scale)
800
700
600
500
400
U.S. recession shaded
300
2004
2006
2008
2010
2012
2014
Slide copyright 2014
Sources: Hawaii Department of Taxation, U.S. Bureau of the Census; seasonal adjustment, deflation and trend extraction by TZE, tax base data
through August 2013
20
Macroeconomic forecasts 2013-2014 “too high?”
Challenge is supply constraints
Forecast growth rates (%)
2013
2014
2015
2016
Visitor arrivals
UHERO
DBEDT
4.3
2.9
3.2
2.7
2.3
2.3
1.1
2.1
Non-ag payroll employment
UHERO
DBEDT
2.1
1.3
2.4
1.8
2.1
1.7
1.8
1.5
Unemployment rate
UHERO
DBEDT
4.6
4.6
4.0
4.2
3.7
4.0
3.5
3.8
Honolulu CPI inflation rate
UHERO
DBEDT
2.0
1.7
2.1
2.1
2.8
2.5
3.9
3.0
Real personal income
UHERO
DBEDT
1.6
2.3
3.5
3.3
2.9
2.7
2.3
2.4
Real Hawaii GDP
UHERO
DBEDT
3.1
2.4
4.3
2.8
4.0
2.5
3.3
2.3
2.7
3.5
3.2
2.8
Geometric mean real growth rate
Slide copyright 2014
Sources: Hawaii DBDT (November 29, 2013) (http://dbedt.hawaii.gov/economic/qser/outlook-economy/), UHERO (October 25, 2013)
(http://www.uhero.hawaii.edu/assets/13Q4StateUpdatePublic.pdf)
21
Annual real GDP growth, Hawaii (bars), U.S. (line);
forecasts DBEDT-UHERO (puka), NABE (dots)
Percent
U.S. recessions shaded
Forecast
5
Hawaii actual
U.S. actual
DBEDT-UHERO
NABE (U.S.)
0
-5
1990
1995
2000
2005
2010
2015
Slide copyright 2014
Source: Bureau of Economic Analysis, U.S. Department of Commerce; National Association for Business Economics (December 2013)
(http://nabe.com/nabe_outlook_dec_2013); DBEDT and UHERO forecasts cited on slide 21
22
U.S. unemployment rate → FRB threshold 6.5%;
Hawaii unemployment rate: bogged, 2013H2
12
U.S. average
Neighbor Isles
Oahu
Percent
8
6.5%
Neighbor Isles
4
4.0%
Oahu
U.S. recessions shaded
0
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
Slide copyright 2014
Source: Bureau of Labor Statistics, U.S. Department of Labor, Hawaii DLIR and DBEDT; seasonal adjustment of Hawaii data by TZE; monthly data
through November 2013
23
Distributions of FOMC participant’s forecasts for
the fed funds target rate and weighted averages
2013
2014
2016
2015
Longer-run
5
Percent
4
3.88%
3
2.18%
2
1.06%
1
0.40%
0.25%
0
0
5
10
15
0
5
10
15
0
5
10
15
0
5
10
15
0
5
10
15
Number of observations (FOMC participants, total = 17)
Slide copyright 2014
Source: Figure 2. Overview of FOMC participants’ assessments of appropriate monetary policy released with December 18, 2013 projections
(http://www.federalreserve.gov/monetarypolicy/fomcprojtabl20131218.htm)
24
Treasury constant-maturity yields (term structure)
and fed funds rate trajectory implied by the FOMC
U.S. recessions shaded
9/11
Lehman
Percent
6
10-year U.S.
Treasury Note yield
“Longer-run (4%)”
4
2
0
Effective fed
funds rate
Dec. 2013 FOMC fed
funds rate forecast
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Slide copyright 2014
Source: Federal Reserve Board (H.15) and Figure 2. Overview of FOMC participants’ assessments of appropriate monetary policy released with
December 18, 2013 projections (http://www.federalreserve.gov/monetarypolicy/fomcprojtabl20131218.htm)
25
Summary
Macroeconomic outlook
U.S. real GDP growth forecast: 2% going to 3% (Can Hawaii match that?)
Private sector growth despite fiscal drag, now coming from federal government
Oil-driven inflation shocks were temporary; tighter labor markets lurking
Normalization of monetary policy raising interest rates—more drag
Capacity constraints stifling Hawaii expansion; capital formation “head fake”

2013 monthly visitor arrivals (s.a.) declined during the course of the year
2013 quarterly real visitor expenditure (s.a.) declined during year
2009–2013 homebuilding lowest for any four-year period since World War II
2013 real contracting receipts (s.a.) declined during year
Slide copyright 2014
26
Mahalo!
Slides available from:
Paul H. Brewbaker, Ph.D.
Principal, TZ Economics
606 Ululani St.
Kailua, Hawaii 96734-4430
[email protected]
Slide copyright 2014
Slide copyright 2014
27

Download Report