Hawaii 2026 Growth Forecast Trimmed to 1.3 Percent
State economists lowered the 2026 growth projection to 1.3 percent, down from 1.6 percent in the previous quarter. Inflation and shorter tourist stays are the primary drivers of this economic slowdown.
Hawaii's economy is projected to expand by only 1.3 percent this year. This figure represents a significant deceleration from the 2.5 percent growth recorded in 2025. The Department of Business, Economic Development and Tourism released this updated quarterly forecast on Thursday. The revision pulls back the outlook from the 1.6 percent estimated three months ago. Persistent inflation and a reduction in total visitor days are the cited causes. Construction and health care sectors are providing partial support to the economy. Growth is expected to recover slightly to 1.6 percent in 2027.
Employment figures show a stable but tight labor market. Nonagricultural jobs totaled 642,700 in July, a 0.2 percent increase from the prior year. The unemployment rate rose to 2.7 percent, up half a point from July 2025. This increase reflects a larger workforce rather than job losses. Construction added 1,300 jobs and health care added 2,100 jobs in the first seven months of 2026. Private sector hiring rose by 3,200 positions over the same period. This private gain offset a decline of 2,200 jobs in government employment. Federal government positions in the state fell by 3,000, or 8.5 percent.
Inflation Remains Elevated Amid Energy Spikes
Consumer prices continue to outpace income growth. The Urban Hawaii Consumer Price Index rose 5.6 percent year-over-year in July. Core inflation, excluding food and energy, stood at 4.8 percent. Energy prices spiked 22.5 percent due to geopolitical disruptions. However, energy costs fell 5.1 percent between May and July. This decline suggests the peak of energy-driven inflation may be passing. The state projects annual inflation will average 4.4 percent for 2026. Inflation is expected to drop to 3.1 percent in 2027. It should ease further to 2.5 percent by 2029.
Tourists Spend More During Shorter Stays
Tourism metrics show a shift in visitor behavior. Arrivals increased by 2.5 percent to 5 million in the first half of 2026. Total visitor spending rose 6.3 percent to 11.6 billion dollars. Conversely, total visitor days fell 3.8 percent to 41.4 million. In July, the average length of stay dropped 14.1 percent to 7.6 days. Average daily spending jumped 17.1 percent to roughly 296 dollars per visitor. Mainland US markets remain strong, with East Coast arrivals up 13.4 percent. International capacity is decreasing, with Japan seats down 12.9 percent. Korea and Oceania seat availability fell by over 20 percent. Full-year projections include 9.7 million arrivals and 22.4 billion dollars in spending.
Income Growth Slows After One-Time Payments
Real personal income growth is expected to decline sharply. The rate drops from 3.9 percent in 2025 to 0.6 percent in 2026. This reduction is largely attributed to the fading impact of Maui wildfire settlement payments. These one-time payments inflated income figures in the previous year. According to the report from GN markets/inflation (en-US), the underlying economic trend shows a correction to more sustainable levels. The state anticipates job growth will remain modest through 2029. Unemployment is projected to ease slightly to 2.3 percent by the end of the forecast period.
