KAHULUI — The good news is, in Maui County, economic contractions are shorter than expansions. The bad news is, Maui is in a contraction now, The Maui News reported today.

The 34th annual Maui County Business Outlook Forum at the Maui Beach Hotel was easily the most downbeat in decades if not ever.

The Elleair Ballroom was filled with people paying to eat shrimp and hear bad news. Leroy Laney, who has given the state and Maui updates since the 1980s, said afterward that the crowd had been only half as big as some of his presentations to the Maui Chamber of Commerce in good years.

These outlooks are sponsored on the Neighbor Islands by First Hawaiian Bank. Laney said this year's outlook on Kaua'i drew 400 people, even more than Friday's meeting on Maui.

It's the uncertainty. Jack Suyderhoud, who gave the national and global update, opened with grim humor.

"Normally, I would take great pleasure in saying thank you for inviting me to speak," he said.

"I believe we are now in an undeclared recession," he said.

Even though the formal definition of two consecutive quarters of contraction has not been attained, he predicted, it will be by year's end. Suyderhoud, professor of business economics at the Shidler College of Business at the University of Hawai'i, admitted error.

"In the summer of 2007, when I last stuck my neck out to present the national and global economic outlook, I thought 2008 would have been better than 2007. I was wrong - wrong, wrong, wrong."

Both Laney and Suyderhoud agreed that nobody really understands the nature and size of the financial troubles, in the United States or around the globe.

"The Fed's actions were too little and too late," said Suyderhoud, referring to moves by the Federal Reserve to cut interest rates and provide loans to major U.S. banks.

He traced the downturn back to last year and four problems.

Two, he said, were cyclical, the subprime mortgages linked to a housing boom and the rise of commodity prices.

Two were persistent, the lack of saving by Americans and concerns about the environment.

Earlier this year, inflation was considered to be a problem, he said. Oil and food prices were rising. Even though they have backed off somewhat, their effects have spread though the economy through higher shipping prices.

"With the slowdown in the economy, inflation will decline to the point where it will not be a policy concern for at least the next couple of years."

It has been the spread of uncertainty and mystery in the financial system that has led economists to say they don't understand the size of the problem, and they don't believe policymakers grasp it either.

"It is also important to remember that most financial institutions — especially our host here today — are well-managed, well-capitalized and are still making loans to qualified borrowers," Suyderhoud said.

First Hawaiian Senior Vice President Mitchell Nishimoto, in introducing the economists, emphasized the point. His bank, he said, will record its highest income in its 150-year history this year.

The nation's local and regional banks "have taken a more conservative approach," Nishimoto said. "We don't plan on changing any of our lending policies at all. It's business as usual."

Not, however, for money center banks and banklike institutions. Suyderhoud noted that the approach to solving those problems "involves creating more concentration in the financial sector."

He wonders whether today's solutions will create their own problems down the line, when "even more institutions will be 'too large to fail.' "

Suyderhoud predicts Americans, who don't save, will learn a lesson and in the future rely more on income and less on credit.

Laney, a professor of economics and finance at Hawai'i Pacific University, noted that his outlooks have been predicting a slower economy for a couple of years.

"This year that's happened."

Statewide, personal income, which has grown every year since 1997, is predicted not to grow this year. Job creation also is expected to be zero. On Maui, electricity sales (a good proxy for economic activity) will grow a mere 0.1 percent. (See related story.)

Laney reminded the audience that economic slowdowns, the bottom dips in the business cycle, are not only unavoidable but desirable. They give infrastructure time to catch up.

"We often forget that when the economy enters a phase of no growth or contraction, that it is usually from a record level of real economic activity."

That is the case for Hawai'i today.

"It's also likely that the local economy won't be over its current slump in just a year or so," he said. "But there is no reason now to project the pause will be as long or as deep as in the 1990s, because speculative excess in the economy wasn't as widespread this time."

In the question period, he clarified that he wasn't saying there has not been speculation recently. However, it did not reach the levels of the yen-driven frenzy of the 1980s, which led, among other things, to the building in a period of five years of seven large luxury resorts on Maui and several smaller ones, as well as massive investments in existing properties.

One signal he uses is an internal First Hawaiian tracking of credit card spending, as measured by the bank's card customers.

The graph covers same-store transactions at 300 major merchant customers. Growth was 15 percent or better in 2003-04, and has varied between 4 percent and 6 percent since then.

"It's clear that growth started to taper off well before the recent slowdown," he said.

Maui's visitor industry started slowing down in 2007, when visitor spending declined. Although Maui had been enjoying higher levels of spending before, it was the only county to see a fall in head count last year, and one of two (along with Honolulu) to see total spending drop.

The failure of Aloha and ATA airlines hit Maui this year, as did the withdrawal of two Norwegian Cruise Line cruise ships.

The impact of these events were uneven, Laney said. Activity operators who enjoyed cruise passenger business felt it most, and they included helitours, boat expeditions and some luaus. The withdrawal of ATA was felt less at the luxury hotels, because ATA served a budget-oriented clientele.

Laney has been reporting a steady decline in residential building permit totals for the county since mid-2006.

"This year, there's an added wrinkle," he said. "A number of projects that were approved earlier and were actually under way are now being shelved or at least being pushed back as developers adopt a wait-and-see stance."

Suyderhoud said national housing prices haven't found their bottom yet, and Laney said falling prices lead to falling demand, "as buyers project further price declines and wait for the bottom."

Maui housing prices were down in the late '90s and "the lesson for this time is that it may take a few years before we see Maui home prices take off again."

He said it is unclear what will trigger that recovery.

He noted that Maui has enjoyed 11 straight years of expansion, which is two years longer than the previous expansion in the '80s, but down cycles are part of the system.

"The business cycle cannot be repealed," Suyderhoud said.

He also counseled that people shouldn't worry overmuch about "the r-word."

"To the average household or business, it really means little whether real growth is a little positive or a little negative."

He added that for Maui County, "the level of economic activity will remain high even if there is some shrinkage."

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