Hawia Econ

Hawaii's economy has changed drastically since it became a state. In 1958, defense, sugar, and pineapple were the primary economic activities, accounting for 40% of Gross State Product (GSP). In contrast, visitor-related expenditures stood at just over 4% of Hawaii's GSP prior to statehood. Today the positions are reversed; sugar and pineapple constitute about 1% of GSP, defense accounts forjust under

4. Hawaii. Sylvia McNair. C1990. Childrens Press. Chicago.

2."Hawaii," Microsoft (R) Encarta. Copyright (c) 1994 Microsoft Corporation. Copyright (c) 1994. Funk & Wagnall's Corporation.

Hawaii's people have seen dramatic changes in the economic structure over the last generation. The military and agriculture, the traditional pillars of the Hawaii economy, have declined and no longer employ the bulk of the labor force. At the same time, Hawaii's increasing reliance on service industries, especially tourism, makes them particularly sensitive to external economic events. To some extent, the effects of this sensitivity are reflected in theunprecedented long period of low growth in recent years. At no time since statehood has Hawaii grown at such low rates for such a sustained period. The initial downturn was clearly associated with the cyclical recession on the mainland and eventually in Japan. This cyclical downturn was exacerbated by important structural changes in Hawaii's economy. While Hawaii cannot ignore and must still address these structural issues, it appears that it is now rebounding from the cyclical downturn. Fourth quarter economic data for 1995 show that it is entering an economic recovery and prospects for the medium term are good.

The consumer inflation rate, as reflected in the percentage change of the Honolulu Consumer Price Index, increased by 2.1 percent between the first half of 1994 and the first half of 1995. In the second half of 1995, the inflation rate slowed to 0.7 percent as compared to the second half of 1994. If the current trend continues, overall inflation for Hawaii in 1995 will be slightly lower than 2.0 percent, the lowest since 1986. DBEDT expects the Honolulu Consumer Price Index to increase about 2.0 percent in 1995 and 2.5 percent in 1996.

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