Transcript Powerpoint Slides from Rating Agencies Presentation

Hawai‘i Outlook: Fallout from
Sept. 11 and Recovery Prospects
Presentation for Credit Rating Agencies
Honolulu Convention Center
Wednesday, January 23, 2002
Terror and Recovery
• September 11 caused wide-spread damage to an
already-slowing global economy
• Hawaii effects large because of reliance on air
travel and tourism
• Relative strength prior to attacks provides support
• Many unknowns make forecasting difficult
• I’ll talk about a preliminary UHERO assessment
and forecasts for the next two years
• These results are in part excerpted from a
November report to DBEDT.
Rating Agencies, January 23, 2002
http://www2.hawaii.edu/~UHERO
U.S. Cooling Before 9-11
Percent
10
8
6
4
2
0
-2
1999
2000
2001
US Real GDP Growth
Rating Agencies, January 23, 2002
http://www2.hawaii.edu/~UHERO
Japan Was Falling Fast
110
105
100
95
90
JAN
2000
MAR MAY JUL
SEP
NOV JAN MAR MAY JUL
2001
SEP
NOV
Industrial Production
Rating Agencies, January 23, 2002
http://www2.hawaii.edu/~UHERO
and Japanese Unemployment
was at post-war record levels
5.60
Percent
5.40
5.20
5.00
4.80
4.60
JAN
2001
MAR
MAY
JUL
SEP
NOV
Unemployment Rate
Rating Agencies, January 23, 2002
http://www2.hawaii.edu/~UHERO
But Hawaii Was in
Pretty Good Shape
Percent
6
4
2
0
-2
2001 figures are pre-9/11 forecasts
-4
1989
1991
Real Income
Rating Agencies, January 23, 2002
1993
1995
1997
1999
2001
Real Gross State Product
http://www2.hawaii.edu/~UHERO
Then the World Changed
40
Percent
20
0
-20
-40
-60
-80
-100
-120
9 16 23 30 7 14 21 28 4 11 18 25 2 9 16 23 30 6 13
SEP
OCT
NOV
DEC
JAN
Domestic Flights
Rating Agencies, January 23, 2002
International Flights
http://www2.hawaii.edu/~UHERO
Outlook Worsened Across the
Board
• US Enters Recession
* Disruptions pushed economy over edge to recession
* Consumer confidence takes a hit, but spending holds up
* Quick Fed and some Federal gov’t action
• Japan’s prospects turn even worse
* Hoped-for export-led recovery down the tubes
* Government unable or unwilling to do much
• Hawaii tourism hammered
* Passenger counts, ocup. rates fell well below 2000
* Spillovers to broader economy limited
Rating Agencies, January 23, 2002
http://www2.hawaii.edu/~UHERO
Hawaii Jobs Destroyed Fast
Initial Unemployment Claims attributable
to Sept. 11 Attacks,
Weeks ending Sept 22 through Oct. 16
Hotels and related enterprises
5,359
Transportation
1,431
945
Eating and Drinking
Establishments
Other Retail
1,340
Other
2,308
Total
11,383
Source: UHERO estimates from DBEDT data.
Rating Agencies, January 23, 2002
http://www2.hawaii.edu/~UHERO
Job Market Situation
At Year End
Percent Change in Jobs over 2000
Jan-Sep
Average
1.7%
Oct-Dec
Average
-1.5%
Trade
2.2
-2.7
Services
2.5
-2.3
Construction
Finance, Insur,
Real Estate
0.5
0.7
-0.3
-0.1
Total Non-Ag. Jobs
Rating Agencies, January 23, 2002
http://www2.hawaii.edu/~UHERO
Assessing the Forecasting
Environment
• Prospects for US, Japanese recoveries will play
key role
* Econometric modeling captures HI response to external
developments
• But worst risks aren’t economic
* Prospects for War on Terrorism
* Evolving attitudes toward vacations and air travel
• Policy uncertainties
* How much more from Feds?
* Chances of significant State Legislative action
• Spillovers and unrelated bad luck
* Dengue fever scare over?
Rating Agencies, January 23, 2002
http://www2.hawaii.edu/~UHERO
Macro Effects Explain Only
Part of Visitor Decline
Rating Agencies, January 23, 2002
http://www2.hawaii.edu/~UHERO
The Gulf War As Guide?
30.0
Iraq Invades Kuait
Aug 2, 1990
20.0
10.0
0.0
-10.0
-20.0
-30.0
Gulf War
-40.0
90: 1
90: 7
Eastbound
Rating Agencies, January 23, 2002
91: 1
Westbound
91: 7
Total
http://www2.hawaii.edu/~UHERO
External Assumptions
• US economy will resume growth this quarter
* Accelerates toward 3+% rates by year end as monetary
(and some fiscal) stimulus kick in
* Interest rate environment will continue to support
spending
• Japan growth will not resume until late in the year
* Will not touch 2% growth until 2003
* Yen will remain about 120 for next several years
• Further improvement in security environment
supports continued tourism recovery
Rating Agencies, January 23, 2002
http://www2.hawaii.edu/~UHERO
UHERO Forecast
Highlights
• Visitor arrivals fell 8-9% last year
* Japan travel weakness means only 2% growth in 2002
* Mainland drives 7.4% growth in 2003
• Job losses for state will top 14,000
* More than 6,000 in hotels
* Only slow job recovery
• Unemployment will rise to 5.6%
• Hawaii has entered a moderate recession
* Real income will fall 1.5% before beginning recovery
next year
Rating Agencies, January 23, 2002
http://www2.hawaii.edu/~UHERO
Westbound Arrival Recovery
Continues
1250
Percent
000's
15
10
1200
5
1150
0
1100
-5
1050
1000
-10
1999
2000
Westbound Arrivals
Rating Agencies, January 23, 2002
2001
2002
2003
-15
Growth Rate
http://www2.hawaii.edu/~UHERO
Eastbound Visitors Will Take
Much Longer
650
Percent
000's
600
60
40
550
20
500
0
450
-20
400
-40
350
300
1999
2000
Eastbound Arrivals
Rating Agencies, January 23, 2002
2001
2002
2003
-60
Growth Rate
http://www2.hawaii.edu/~UHERO
Tourism Job Losses Will
Persist
Percent
000's
40
15
10
38
5
0
36
-5
-10
34
-15
32
1999
2000
Hotel Employment
Rating Agencies, January 23, 2002
2001
2002
2003
-20
Growth Rate
http://www2.hawaii.edu/~UHERO
Overall Job Losses Will Be
Less Severe
590
Percent
000's
4
580
3
570
2
560
1
550
0
540
-1
530
-2
520
1999
2000
Pre911
Base Growth Rate
Rating Agencies, January 23, 2002
2001
2002
2003
-3
Base
http://www2.hawaii.edu/~UHERO
A Moderate Recession in
Real Income
36500
Mil $
Percent
5
36000
4
35500
3
35000
2
34500
1
34000
0
33500
-1
33000
1999
2000
Real Personal Income
Rating Agencies, January 23, 2002
2001
2002
2003
-2
Growth Rate
http://www2.hawaii.edu/~UHERO
Unemployment Rate will Rise
6.5
Percent
6.0
5.5
5.0
4.5
4.0
3.5
1999
2000
2001
2002
2003
Unemployment Rate
Rating Agencies, January 23, 2002
http://www2.hawaii.edu/~UHERO
Inflation Will Cool
2.0
Percent
1.5
1.0
0.5
0.0
1999
2000
2001
2002
2003
Inflation Rate
Rating Agencies, January 23, 2002
http://www2.hawaii.edu/~UHERO
Risks and Mitigating Factors
• Risks of Further Fallout
* Bankruptcy risks for Japanese-dependent retail firms
* Slower pickup in global economy
• Factors supporting growth
* Federal and state tax cuts
* Income creation from home refinancing and sales
* Renovation tax incentives
Rating Agencies, January 23, 2002
http://www2.hawaii.edu/~UHERO
The Numbers
2000
2.3
2001
1.5
2002
0.8
2003
3.5
Non Agriculture Jobs (%)
Unemployment Rate (%)
3.1
4.3
0.7
4.6
-0.9
5.5
1.8
5.4
Inflation Rate, Honolulu (%)
1.8
1.5
0.9
1.5
TOURISM DETAILS (000's)
Total Visitors
% Change
Eastbound Visitors
% Change
Westbound Visitors
% Change
6976.0
3.5
2345.8
1.5
4630.7
4.5
6435.3
-7.8
1993.0
-15.0
4452.2
-3.9
6562.1
2.0
1997.2
0.2
4564.9
2.5
7046.3
7.4
2230.1
11.7
4816.1
5.5
Real Personal Income (%)
Rating Agencies, January 23, 2002
http://www2.hawaii.edu/~UHERO
Rating Agencies, January 23, 2002
http://www2.hawaii.edu/~UHERO
High-Low Scenarios
Hawaii
Eastbound Visitors (000s)
Hawaii
Westbound Visitors (000s)
650
1250
600
1200
550
1150
500
1100
450
400
1050
350
1000
300
950
250
1999
2000
Base
2001
High
2002
Low
Rating Agencies, January 23, 2002
2003
1999
2000
Base
2001
High
2002
2003
Low
http://www2.hawaii.edu/~UHERO
High-Low Scenarios
Hawaii
Unemployment Rate (%)
6.5
6.0
5.5
5.0
4.5
4.0
1999
2000
Base
Rating Agencies, January 23, 2002
2001
High
2002
2003
Low
http://www2.hawaii.edu/~UHERO
High-Low Scenarios
Hawaii
Real Personal Income (Mil $)
37000
36000
35000
34000
33000
1999
2000
Base
Rating Agencies, January 23, 2002
2001
High
2002
2003
Low
http://www2.hawaii.edu/~UHERO