NEWS RELEASE: DBEDT PROJECTS 1.3 PERCENT GROWTH FOR 2026

STATE OF HAWAIʻI
KA MOKU ʻĀINA O HAWAIʻI

JOSH GREEN, M.D.
GOVERNOR
KE KIAʻĀINA

DEPARTMENT OF BUSINESS, ECONOMIC DEVELOPMENT AND TOURISM
KA ʻOIHANA HOʻOMOHALA PĀʻOIHANA, ʻIMI WAIWAI A HOʻOMĀKAʻIKAʻI

JAMES KUNANE TOKIOKA
DIRECTOR
KA LUNA HOʻOKELE

RESEARCH AND ECONOMIC ANALYSIS DIVISION

DBEDT PROJECTS 1.3 PERCENT GROWTH FOR 2026
Moderate Growth with Increasing Inflation Pressure

FOR IMMEDIATE RELEASE
September 10, 2026

HONOLULU — The Department of Business, Economic Development and Tourism (DBEDT) released its third quarter of 2026 Statistical and Economic Report today. DBEDT projects Hawai‘i’s economy to grow 1.3 percent in 2026, decreasing from 2.5 percent growth in 2025. Growth is expected to improve gradually to 1.6 percent in 2027 and 1.8 percent in 2028 and in 2029.

The current forecast is slightly below DBEDT’s second-quarter forecast of 1.6 percent growth due to inflation pressures, reduced visitor days and modest job growth. At the same time, the economy is boosted by construction, healthcare and continued visitor spending.

Labor Market Remains Tight but Stable

Hawai‘i’s labor market remains tight, although employment growth has lost some momentum. Seasonally adjusted nonagricultural wage and salary employment totaled 642,700 jobs in July 2026, only 0.2 percent above July 2025. The seasonally adjusted unemployment rate rose to 2.7 percent in July, up 0.5 percentage points from the unemployment rate in July 2025, due to a slight increase in the labor force and stable total employment.

Job growth remains concentrated in certain sectors. Construction and health-related services continue to provide support to the economy. During the first seven months of 2026, Construction added 1,300 jobs or 3.3 percent compared to the same period in 2025, while Health Care and Social Assistance added 2,100 jobs or 2.8 percent. Jobs in Accommodation increased by 700 or 1.7 percent and jobs in Food Services and Drinking Places increased by 600 or 0.9 percent. Private sector jobs overall increased by 3,200 jobs in the first seven months of 2026 compared to the same period in 2025, offsetting a loss of 2,200 jobs in the Government sector. The Federal Government lost 3,000 jobs, or 8.5 percent in the first seven months of 2026, most of which occurred on O‘ahu.

For 2026, DBEDT projects nonagricultural wage and salary jobs to average 644,100, an increase of 0.3 percent from 2025. Job growth is expected to remain modest at 0.5 percent in 2027, 2028 and 2029. The civilian unemployment rate is projected to average 2.5 percent in 2026 and 2027, 2.4 percent in 2028, and 2.3 percent 2029.

Inflation Remains Elevated but Is Expected to Moderate in 2027

Inflation has increased more than anticipated. The Urban Hawai‘i Consumer Price Index for All Urban Consumers (CPI-U) was 5.6 percent higher in July 2026 than in July 2025. Core inflation, excluding food and energy, was 4.8 percent; services prices were up 6.8 percent; and energy prices were up 22.5 percent.

Recent data also suggest that the pace of price increases may be stabilizing. The all‑items index increased only 0.1 percent between May and July, while energy prices declined 5.1 percent over the two-month period. DBEDT projects annual average CPI-U inflation will be 4.4 percent for 2026, declining to 3.1 percent in 2027, 2.7 percent in 2028 and 2.5 percent in 2029 as energy pressures ease and broader inflation gradually normalizes.

Economic Growth Continues at a More Gradual Pace

Although Hawai‘i experienced broad-based real gross domestic product (GDP) growth of 2.5 percent in 2025, quarterly year-over-year growth has been declining over time, signaling more modest growth in 2026.

DBEDT projects real personal income growth of 0.6 percent in 2026, compared with 3.9 percent in 2025. The moderation reflects softer job growth, higher inflation and the unusually high 2025 base associated with Maui wildfire settlement payments. The U.S. Bureau of Economic Analysis indicates that the first-quarter 2026 decline in personal income was largely attributable to the reversal of those one-time transfer payments, rather than a comparable decline in recurring income sources.

Nominal personal income is projected to grow 4.0 percent in 2026 to about $114.1 billion. As inflation moderates, real personal income growth is expected to improve to 1.3 percent in 2027, 1.6 percent in 2028 and 1.7 percent in 2029.

DBEDT projects nominal GDP to increase 5.2 percent in 2026 to about $131.1 billion. The difference between nominal GDP growth and 1.3 percent real GDP growth reflects higher price pressures. Real GDP is projected to be about $95.4 billion, accounting for inflation in 2026.

Visitor Expenditures Increase as Higher Daily Spending Offsets Shorter Stays

The visitor industry continues to support Hawai‘i’s economy, with solid growth in visitor spending and continued strength in domestic markets. During the first half of 2026, total visitor arrivals increased 2.5 percent to 5.0 million, compared to the first half of 2025, while nominal visitor expenditures rose 6.3 percent to $11.6 billion. At the same time, travel patterns continued to evolve, with total visitor days declining 3.8 percent to 41.4 million as visitors took shorter trips.

July data further reflected this shift toward shorter stays accompanied by higher daily spending. Visitor arrivals increased by 1.1 percent from a year earlier, while average length of stay declined 14.1 percent to 7.6 days and total visitor days decreased 13.1 percent. These changes were largely offset by a strong 17.1 percent increase in average daily visitor spending to approximately $296 per person, helping total visitor expenditures remain 1.7 percent above the July 2025 level.

U.S. markets continued to provide strong support for Hawai‘i tourism. During the first half of 2026, arrivals from the U.S. East increased 13.4 percent, accompanied by a 15.0 percent increase in visitor spending. U.S. West arrivals also increased 1.0 percent, while spending grew a solid 7.6 percent. Arrivals and spending have begun to moderate, however. Scheduled nonstop air seats for the period September through November 2026 show increases in capacity for the U.S. West (6.5 percent) and U.S. East (4.4 percent), but reductions for Japan (-12.9 percent), Canada (‑12.7 percent), Korea (-21.8 percent) and Oceania (-21.3 percent).

DBEDT projects 9.7 million visitor arrivals in 2026, an increase of 0.9 percent. Visitor days are projected to decline 4.5 percent, reflecting shorter stays, while nominal visitor expenditures are projected to increase 2.3 percent to $22.4 billion.

Visitor days are expected to recover 2.7 percent in 2027, followed by more moderate growth in 2028 and 2029. Visitor spending is expected to grow by 5.1 percent in 2027 with the increase in visitor days, followed by growth of 3.3 percent in 2028 and 3.0 percent in 2029.

Global Growth Varies by Region

According to the August 2026 Blue Chip Economic Indicators consensus, U.S. real GDP is expected to increase 2.1 percent in 2026 and 2.0 percent in 2027. Continued U.S. expansion is important for Hawai‘i because the U.S. West and U.S. East remain the state’s largest visitor markets. The Blue Chip panel also expects consumer spending and business investment to support U.S. growth, although higher interest rates and renewed energy price volatility continue to pose risks.

Growth prospects remain uneven across Hawai‘i’s major international markets. Blue Chip projects Canada real GDP growth of 0.8 percent in 2026 and 1.8 percent in 2027; Japan growth of 0.6 percent in 2026 and 0.8 percent in 2027; and Euro area growth of 0.7 percent in 2026 and 1.3 percent in 2027. China is forecast to grow 4.6 percent in 2026 and 4.3 percent in 2027. South Korea is projected to grow 3.0 percent in 2026 before slowing to 2.1 percent in 2027, while Taiwan is projected to grow 10.0 percent in 2026 and 3.7 percent in 2027, reflecting strong AI-related investment. Blue Chip economists expect the yen to remain relatively weak, at about 157 yen per U.S. dollar at the end of 2026 and 152 yen per dollar at the end of 2027.

Forecast Summary: Continued Expansion with Gradual Normalization

DBEDT expects Hawai‘i’s economy to continue expanding through 2029, but at a slower pace than projected in the second quarter forecast. Real GDP growth is projected at 1.3 percent in 2026, 1.6 percent in 2027, 1.8 percent in 2028 and in 2029. Inflation is expected to peak at 4.4 percent in 2026 and then decline toward 2.5 percent by 2029.

The 2026 outlook reflects continued growth, with differences between nominal and real activity driven by higher expected inflation. Visitor spending, nominal GDP and nominal personal income are projected to continue increasing, while price pressures, shorter visitor stays and moderate job growth are expected to temper gains in real output and household purchasing power. The forecast anticipates a gradual improvement in these conditions beginning in 2027.

The full report is available at dbedt.hawaii.gov/economic/qser/.

Statement from DBEDT Director James Kunane Tokioka

Year-to-date 2026 has brought economic challenges for our state, including inflation and several severe weather events. We extend our deepest gratitude to the emergency responders and community partners working tirelessly to assist those in need. As response operations continue, we will assess impacts and coordinate the resources needed. We encourage everyone to stay informed through official updates and follow all safety guidance as recovery efforts move forward. DBEDT remains committed to providing information that helps businesses, policymakers and communities plan for the weeks and years ahead.

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