Saturday, August 11, 2007

Hawaii's Economic Growth Outlook

State economists made few changes in their outlook for Hawaii's economy in their latest forecast but now say visitor arrivals will decline slightly.

Personal income, total wage and salary jobs, and state gross domestic product are forecast to increase through 2007 and into 2008, but below the high growth rates of previous years.

The quarterly report released recently comes from the state's Department of Business, Economic Development and Tourism. Highlights of the report include:

The forecasts for real personal income growth remained unchanged at 1.8 percent for 2007 and 1.9 percent for 2008.

The inflation forecast is unchanged at 4.5 percent for this year and 3.8 percent for next year.
Hawaii's real G.D.P. growth is now projected to be 2.9 percent in both 2007 and 2008, up slightly from the government's May forecast.

Total visitor arrivals to Hawaii are expected to decline 0.3 percent in 2007, which is attributed to sluggishness in international tourism.

If the present trend continues, a total of 7.54 million visitors will visit the Islands by the end of this year, spending $12.6 billion, $300 million more than in 2006.

Forecasted arrivals in 2008 have now been lowered a half percentage point to 1.5 percent growth.

The 2007 forecast of wage and salary growth this year has been raised to 2 percent, up slightly from the 1.8 percent forecast in May. The increase is based on better-than-expected job growth in the first half of the year.

Job growth has been particularly strong in professional and business services, the health sector, construction and government activities. The forecast for job growth in 2008 remains 1.5 percent.

Source: BizJournals

Friday, August 10, 2007

ED LEADER NEWSLETTER #23

Aerospace and Defense Industry Profile

Revenues within the US aerospace and defense industry have improved considerably after a 1.4% slump in spending on commercial aircraft caused by a weakened tourism market in the aftermath of 9/11. Increased spending during the recent Gulf War did buffer industry growth rate and reached a value of $464.3 billion in 2005.

Defense expenditure is still the leading source of revenue for the US industry, essentially due to the substantial and ever increasing defense budget of the US Government. Projects such as the missile interception network and the revamp of the US armed forces account for a large proportion of this spending whilst providing welcome revenue boosts for companies such as Boeing during the decline in aerospace spending.

Increasing cost pressures within the aerospace industry have resulted in massive reform as aircraft manufacturers attempt to cut costs whilst producing cost-efficient, highly marketable aircraft to promote sales and stimulate growth within the industry. Growth in defense expenditure has served to compound the problems for the aerospace industry as leading players reduce their aircraft production in order to concentrate their resources on their defense outputs.
Major players within the US aerospace and defense markets include Boeing, Northrop Grumman, Lockheed Martin, General Dynamics and Raytheon. The initial reaction towards Boeings prototype 7E7, expected to enter service in 2008, has confirmed the huge market potential for midsize, fuel-efficient aircraft in the US whilst proving that cost-effective air travel does not necessarily rely on high capacity aircraft. However, the launch of the new Airbus A380, the worlds largest passenger jet, is expected to impact on the sales volumes of Boeings 747 in the international market.

Key Issues

Threat of Terrorism - Efforts to prevent terrorism in the US have swelled defense expenditure whilst increasing costs within the aerospace industry. New regulations, in terms of in-flight security and anti weapon systems, are increasing airlines liabilities, spreading the costs throughout the supply chain and affecting the potential purchasing behavior of airlines, reducing their expenditure on new planes.

Cost Pressure - Rising oil prices, augmented by the demand for low cost air travel, have caused deficits for airlines, which have cascaded along the supply chain. In reaction to this, aircraft manufacturers are increasing outsourcing efforts and developing longer-term contracts with more select groups of suppliers in order to cut costs. In addition, the use of alternative materials to aluminum and steel, such as composites and titanium, and the fly-by-wire concept are a growing part of the strategy to offer airlines cost-efficient operation over the lifetime of the aircraft.

Increasing Military Expenditure - The formation of the Homeland Security Department (HSD) and the creation of a missile interception network have come in a period of increased defense spending in reaction to the growing terrorist threat and the Second Gulf War. With a budget of around $40 billion, the HSD has already introduced legislation to improve the safety of air travel, with cost consequences for airlines, which will pass throughout the supply chain.

Significant Trends

Technological Innovation - As NASA continues its development towards a next generation space vehicle, the demand for a publicly accessible space platform has prompted several initiatives within the aerospace sector to produce a viable option. Amongst other projects, the development of high-speed rocket replacement technologies such as anti-matter production chambers and ramjet engines could usher in a new era of space and air transport and possibly provide an answer to the airline industrys dependence on crude oil.

Shift from Aerospace into Defense - In response to escalating cost pressures from airlines and the reduced capacity of the aerospace industry, aircraft manufacturing companies have begun to concentrate their production efforts into the defense industry to exploit the growth in military spending and maintain revenue streams. The development of the F/A 22 and Joint Strike Fighter configurations and the production of the US missile defense network include contributions from most of the aerospace industrys leading players.

Consolidation - Reduced demand and yields within the airline industry have produced cost pressures, which have resulted in consolidation amongst the airlines. This consolidation has increased the airlines buying power, causing a downward pressure on costs, reducing margins for the aircraft manufacturers and promoting consolidation in a cascading effect along the supply chain.

Thursday, August 9, 2007

Toyota Slower Growth in U.S. in Future

Toyota Motor Corp will continue to grow in the U.S. market, but at a slower rate than it has in the past, and is considering targeting young consumers with a premium small car, the automaker's North American sales chief said on Thursday.

"I don't think the double-digit growth of the past few years will continue because we are such a large part of the U.S. market now," Jim Lentz told new sources.

Lentz said Toyota is on track to post a U.S. sales increase of 5 to 6 percent in 2007. The automaker is now neck and neck with General Motors Corp in global sales, and is expected to become the world's largest automaker this year.

"For next year, we will definitely grow, but we have to reevaluate the market in the fourth quarter to see how much we could grow," he said. Toyota sold 2.5 million vehicles in the U.S. market in 2006 and had more than 17 percent of the market in July.

Read more here.

Harold Gutzwiller Moving On

Harold Gutzwiller has resigned as executive director of the Hendricks County Economic Development Partnership, the county-wide agency that helps spear-head business growth in Avon, Brownsburg, Danville, Plainfield and other smaller towns.

Gutzwiller has accepted a new position as senior economic development coordinator for Hoosier Energy, the Bloomington-based electric power company with 17 REMCs serving all or parts of 48 southern Indiana counties.

Good luck Harold!

Read more here.

Wednesday, August 8, 2007

Specialty Retail Industry Profile

Worth approximately $155 billion in 2006, the US specialty retail sector grew steadily during the 2002-2006 period, with a compound annual growth rate around 5%.

The most important segments of the market are electronics and appliances, jewelry, sporting goods, music, and books. The prospects for the sector are good, as consumer confidence remains strong, despite the dampening effect of rising interest rates. However, it is the rapid growth of online music and video downloads that is expected to be the key driver of growth going forward. This should also sustain demand for associated electronics, such as MP3 players.

While the majority of revenue is generated by store sales, online ordering systems are gaining significance as Internet penetration rates grow. The relatively weak status of the dollar has also attracted many international consumers to purchase via US websites. Many US sectors are currently suffering cost pressures due to high fuel and energy prices, and specialty retail, with its need for transport and distribution services, is no exception.

The leading specialist players in the sector include Best Buy, Barnes & Noble, and Tiffanys. Many companies in the sector are consolidating assets and knowledge, benefiting from economies of scale, and outsourcing services. This consolidation has been necessary in order to compete with traditional and online multi-retailers, such as Wal-Mart and Amazon, which have gained considerable market share in many of the product segments included in the specialty retail sector.

Key Issues

High-End Merchandise - Reflecting rising disposable incomes, consumer tastes are increasingly for high-end goods, which are best catered for by specialty stores. Designer apparel stores are especially benefiting from this shift, prompting mainstream apparel retailers to commission ranges of clothing from fashion designers.

Store Environment - Specialty retailers are focusing on improving shopping experiences by providing more comfortable, ergonomic store environments. Specialty retailers can use improved store environments to differentiate themselves within the marketplace, especially against larger discount retailers, within which such qualities are generally lacking.

Fuel Costs - High fuel prices are reflected by the increased transport and distribution costs of products. Although many costs are passed on to customers, the high degree of price competition within retail markets restricts the extent to which retailers can hike prices. Companies need to balance reductions in profit margins against the maintenance of customer loyalty and market share.

Significant Trends

Online Retailing - In response to growth in online shopping, retailers are prudent to keep up to date with advances within the sector. Investment in innovative technologies to simplify the customer interface and maximize the coordination of inventories will enable retailers to maximize revenue and sustain growth moving forward.

Supply Chain Management - Retailers can benefit considerably from more efficient supply chains, prompting the introduction of automated merchandise planning systems to assist with inventory and forecasting demand. Inventory management systems are helping to optimize product replenishment and shorten lead times. In addition, Radio Frequency Identification Tags (RFITs) are being employed by the retailers to develop faster stocking and tracking procedures.

Consumer Intelligence - The analysis of consumer trends and purchasing patterns has become a key tool in the management of retail operations. Companies gain a distinct advantage in using such intelligence to drive marketing strategies, design store layout, and build product inventories.

Tuesday, August 7, 2007

What's in a Leader? (A View from Corporate America)

Recent focus on board activism and chief executive turnover would have you believe that these are particularly difficult times for CEOs and that the job of a CEO is more challenging than it has ever been. The fact is, the job of a CEO has always been a highly complex task.

In our over 30 years of experience in dealing with leadership issues and education, we have always emphasized the importance of innovative and flexible leadership that is adept at adjusting to changing times and circumstances. As such, over the years, we've selected and awarded leaders based on their ability to take calculated risks and alter an industry, all the while delivering continued shareholder value, built on a strong ethical foundation. Good CEO leaders have operated like this for years.

We are of the belief that great leaders are those that are able to exercise the right leadership traits at the right time to realize the best results.

As leaders, we all know that there are times when we need to take risks, and there are times that we ought to avoid risks. Then, there are times we have to be firm and lead with conviction, and there are times when we need to be a team player. Great leaders know when to balance these traits based on company circumstances.

These days, stakeholder relations, business ethics and corporate social responsibility are top of mind. However, those of us who have been in the business long enough know that personal accountability and brand reputation have always been vital leadership concerns. As such, there's never been a time where ethical leadership was not a part of our evaluation criteria.

Read more here.

Monday, August 6, 2007

Piedmont Triad on Incentives and Their Impact

The Piedmont Triad landed Honda Aircraft Co.'s manufacturing operations this year, proving that economic development doesn't always have to come at a high price.

For $1.4 million in local incentives and $6.7 million in state incentives, Piedmont Triad International Airport gets 300 well-paying jobs, the right to call this the home of the HondaJet and close ties with one of the most prestigious corporate names in the world.

Some say any incentive payment is too much. But in a year when Caldwell County and Lenoir in western North Carolina showered Google with up to $165 million to locate a major operation there, the Honda deal could be considered a bargain.

Read more here.

Sunday, August 5, 2007

Clean Ohio Council's Impact

The Clean Ohio Council has awarded 64 Clean Ohio Revitalization Fund awards since 2002 totaling more than $158 million in brownfield remediation dollars, while leveraging a planned $2 billion in private and public investment upon project completions.

Ohio economic development officials recently announced that $41,188,065 has been awarded for 15 brownfield revitalization projects across the state, pending Controlling Board approval. The Clean Ohio Council, which Lt. Governor Fisher chairs, approved the projects for the Clean Ohio Revitalization Fund Round 4 funding cycle.

Read more here.