The Big Island's economy is likely to grow at a slower pace amid declines in the construction and residential real estate sectors.

Meanwhile Hawai'i County's visitor industry continues to do well despite a statewide dip in arrivals, said First Hawaiian Bank economics consultant Leroy Laney yesterday.

"Hawai'i County is seeing many of the same indications of slowdown, especially in the construction and real estate sectors, as in other areas of the state," said Laney, who is also a professor of economics and finance at Hawai'i Pacific University. "Any economic cycle contains periods of cooling down. This is not only inevitable, it's required for infrastructure to catch up and for slowly rising incomes to help bring affordability back."

Laney, who spoke at the bank's 33rd Annual Economic Outlook Forum held at both the Naniloa Hotel and Hapuna Beach Prince Hotel, noted that construction activity on the Big Island peaked in early 2006, with the decline continuing into this year. Residential real estate prices have been dropping since a high in 2005. In 2006, the median islandwide single-family home price was $440,000. In the first half of 2007, it fell 4.5 percent to $420,000.

"Once such a cooling starts, it usually doesn't reverse in just one year, though there usually aren't sharp declines, just a plateau," Laney said. "I frankly believe there are more contractions to come, as the market returns to equilibrium."

The forecast is generally in line with statewide forecasts, which predict slowing economic growth but no recession.

The cooling comes as both the construction and tourism sectors plateau after an exceptional runup during the past several years. On the Big Island, arrivals were up 4.1 percent through the first half of 2007.

"In the first half of 2007, major visitor industry indicators show that the Big Island is doing quite well," Laney said.

"The state as a whole is having another flat year with respect to total arrivals, but the Big Isle had the second-highest growth rate in the state, trailing only Kaua'i."

Laney's Kaua'i economic forecast was released last week: Kaua'i's economy remains the hottest in the state as Garden Island construction and building permit activity remain strong and the island leads the state in visitor arrival growth.