Hawaii’s economy should maintain mild growth this year, according to a new state forecast that notes recent spikes in inflation and personal income.

The Department of Business, Economic Development and Tourism published its latest quarterly report assessing Hawaii’s economy on Monday, and slightly downgraded its growth forecast for 2026 to 1.6% compared with 1.7% growth it projected in a March report.

DBEDT did not change its outlook for the local economy over the next few years, and still expects growth of 1.8% in 2027 followed by 1.9% in 2028 and 2029.

In 2025, Hawaii’s economy grew by an estimated 2.5%, which DBEDT characterized as robust and driven by a broad base of industries and strong visitor spending. Last year’s growth topped the national average of 2.1%.

“Despite the impacts of severe weather and the ongoing Middle East conflict, Hawaii’s economy remains resilient based on year-to-date 2026 data,” the report said. “Growth is expected to moderate, however, with the impacts of higher inflation and slower job growth.”

James Tokioka, DBEDT’s director, added in a statement, “Hawaii’s economy showed stability and endurance in 2025. Looking ahead, DBEDT anticipates more moderate growth as inflation rises due to the impacts of the Iran conflict. However, our labor market remains steady and our economy will continue to benefit from ongoing construction activity, infrastructure investment and tourism spending.”

The measure of Hawaii’s economy is the value of all goods and services in the state adjusted for inflation, also known as real gross domestic product.

Inflation, which can be painful to the pocketbooks of consumers and businesses, can detract from such economic growth. DBEDT noted that inflation on Oahu estimated every other month by the federal Bureau of Labor Statistics jumped from 2.4% in January to 3.7% in March and then to 5.1% in May.

DBEDT also said local energy prices spiked 28.8% in May compared to the same month last year.

The increases to energy prices, which are part of broader inflation, are due to surges in global oil prices stemming from the war in Iran that the United States and Israel began on Feb. 28 and may be nearing an end.

For all of 2026, DBEDT expects Oahu inflation will be 3.8%, and then drop to 2.8% in 2027 before settling a bit more at 2.6% in 2028 and 2.5% in 2029.

One healthy aspect to Hawaii’s economy as described by DBEDT is a steady labor market with low unemployment and private-sector job growth.

Hawaii’s unemployment rate without seasonal adjustments was 2.2% in the first quarter of 2026 compared with 2.4% in the same quarter a year earlier. Preliminary data for April put the rate at 2.5%, up from 2.2% in the same month last year, though DBEDT noted the most recent rate was tied for third-lowest among states.

The number of nonagricultural wage and salary jobs in Hawaii slipped 0.1%, or by 800, to 642,900 in the first quarter of 2026, reflecting losses mostly in the federal government and some state government positions, DBEDT’s report said. In April, Hawaii’s job count rose 0.3%, a gain of 2,000 jobs, compared with April 2025, according to the report.

Personal income in Hawaii has been on an upward tear, according to DBEDT’s report, but that appears to be based on preliminary federal data that one local economist said isn’t accurate.

DBEDT’s report said personal income statewide jumped 12.4%, or by $12.9 billion, in the fourth quarter of 2025 over the same quarter a year earlier based on data from the U.S. Bureau of Economic Analysis that attributes much of the surge to payment of a legal settlement compensating victims of the 2023 Maui wildfires.

None of the $4 billion settlement, except for about $112 million, has been paid to people who suffered losses, but BEA in April reported that Hawaii had the biggest gain in personal income among states at 41.5% in the fourth quarter of 2025 largely driven by a wildfire settlement payment.

Carl Bonham, director of the University of Hawaii Economic Research Organization, said during a Hawaii Council on Revenues meeting in May that the BEA data estimating Hawaii personal income growth was flawed.

“The (wildfire) settlement has actually started to show up in the (BEA) income data,” he said. “It shouldn’t be showing up in the income data.”

The $4 billion settlement is to be paid out in four roughly equal annual installments, and the first payment is expected in July or August.

DBEDT is likely to revise its figure for personal income growth in a future report. In the current report, the agency put Hawaii’s personal income growth rate for all of 2025 at 6.9%, up from 4.9% in its prior report released in March.

The agency projects that personal income this year will rise 4% followed by increases of 4.3% in 2027, 4.2% in 2028 and 4.2% in 2029.

Hawaii’s biggest economic driver, tourism, is doing well with moderate growth in visitor arrivals and strong visitor spending, according to DBEDT’s report.

During the first three months of this year, visitor arrivals rose 3.8% over the same period last year while visitor spending surged by 9% in the same comparable period.

DBEDT also said that for April there was a 0.5% dip in visitor arrivals but spending still rose 4.8% compared with the same month last year.

The agency projects that visitor arrivals for all of 2026 will rise 1.9% followed by 1.3% in 2027 and then 1% in 2028 and 2029. Visitor spending is projected by DBEDT to rise 4.3% for all of 2026 followed by 4.5% in 2027, 3% in 2028 and 2.9% in 2029.

Another major industry helping propel Hawaii’s economy, construction, had an uneven start to the year with a rise in jobs, government contract awards and spending on state projects mixed with a decline in authorizations for private building projects.

HONOLULU (HawaiiNewsNow) – It’s shaping up to be a slower-than-usual summer for Hawaii’s tourism industry, but business leaders hope events that market the islands’ unique local food and products can turn that around.

The state expects total visitor arrivals to grow only about 2 percent this year. Numbers slid half a percent in April from the previous year, with the largest market, West Coast tourists, falling nearly 5 percent. The statewide hotel occupancy rate averaged 76.4 percent.

Economists blame higher airfares, rising inflation, fewer international visitors and uncertainty following the March kona low storms.

State-supported events like the Hawaii Lodging & Tourism Association’s (HLTA) Hawaii Hotel and Restaurant Show and DBEDT’s Hawaii Made Conference aim to boost tourism by promoting products you can only find in Hawaii.

“We’re going to continue to struggle, but we can’t stop promoting. We can’t stop advocating,” said HLTA President/CEO Mufi Hannemann. “If you can travel during these times, you’re going to come and have a wonderful experience in Hawaii whether you’re just coming for sun and surf or you’re coming here to immerse in our culture or to do business, this is the place to come.”

And those who do come are spending more.

At the Hotel and Restaurant Show this week, local food manufacturers hoped to secure more buyers in the hospitality industry.

Many rely on business and leisure visitors trying their products while in Hawaii and taking them back home where they promote it.

“The traceability that you want to know where your food is coming from,” said June Rees, general manager of Kauai Shrimp, which has 40 ponds off the coast of Kekaha. You’ll find their shrimp on many menus across the islands.

“There are a lot of people that heard about us but never tried, so this show gives us exposure to the new restaurant or chef that have heard about the name but never really tried the product.”

But fewer tourists mean less sales and slower business growth and investment.

Jina Wye is the founder of Okonokai, which makes snacks from native seaweed grown off the Kona coast on Hawaii Island.

“It’s like a superfood that everyone should be eating everyday,” she said. “There’s a lot of just missing infrastructure for manufacturing, but that’s something that we’re working on. It’s actually why I’m part of this whole like DBEDT pavilion because the state is really working hard to develop more infrastructure.”

For the family behind Aloha Star Coffee Farm, getting their award-winning premium kona coffee into airports, hotels and restaurants is key.

“Getting the opportunity to find the market niche that we need,” said Karina Rodriguez, co-owner of Aloha Star Coffee. “We are small, that sometimes we don’t have all the resources for marketing and, and going to the biggest stores, and we are working on that.”

Food entrepreneurs will get another chance to promote their products at DBEDT’s Hawaii Made Conference this Tuesday at the Sheraton Waikiki. Click here to register and for more information.

The 16th Hawaii Food & Wine Festival is another event that promotes local chefs and restaurants while promoting tourism. It spans three weekends from Oct. 16 to Nov. 8 across three islands. Find information here.