Hawaii is predicting faster economic growth this year and next, and the tourism industry continues to welcome more visitors and construction increases.
The state's business and economic development department said in a report Wednesday that Hawaii's economy should expand 2.2 percent this year. That's 0.4 percentage point greater than the department predicted last quarter.
Next year, it forecasts Hawaii's economy will grow 2.3 percent -- 0.3 percentage point higher than its last prediction.
Eugene Tian, chief state economist, said economy is moving out of a recovery stage and into a growth period.
He said the recovery is led by tourism, with a record-high 7.7 million visitors projected to visit Hawaii this year. This would beat the previous peak of 7.6 million in 2007.
Tian said the number of travelers visiting the islands already exceeded expectations during the January to March months. The trend will continue to be strong, he said, noting airlines are increasing seats on Hawaii-bound flights 8 percent this year.
There's also some indication construction work will increase after the value of building permits jumped 46.2 percent in the January-March quarter.
Tian said permits for additions and alternations increased the most -- 88 percent. This was likely due to the number of people installing solar panels on their roofs, he said.
Commercial permits climbed 28 percent while permits for residential construction declined 1 percent, he said.
He expects the full effect of these gains be reflected in coming months because it takes a half-year or a year for people to act on the permits.
"So that means the second half of the year, or next year, the construction industry is going to increase," he said.
Further, since the permit numbers don't include work on the Honolulu rail line and other government construction, there's likely to be even more business for the industry, he said.
One point clouding the outlook is federal spending. The U.S. is expected to cut spending next year but it's not clear how this will affect Hawaii. It could have a significant impact, since federal spending is the second largest contributor to the state economy.