Military spending in Hawai'i grew slightly in the 2007-2008 fiscal year even as the national economy began to slow, according to a new report.

Total defense spending rose 1.6 percent to $5.5 billion during the year ending June 30, 2008 from the year-earlier's $5.4 billion, figures compiled by the state Department of Business, Economic Development and Tourism.

A large chunk of the military spending came in the form of procurement contracts, which jumped 12.5 percent to $2.1 billion, the report said.

Military construction, meanwhile, slipped to $622 million from fiscal year 2006-'07's $767 million. Despite the decline, spending on such projects has helped underpin Hawai'i's construction industry at a time when the overall economy is slowing.

The Department of Defense about five years ago awarded three contracts for replacing or renovating roughly 17,000 Army, Navy, Air Force and Marine Corps homes on O'ahu over a decade or so.

The report also underscored the important role the defense sector plays in Hawai'i's economy.

According to DBEDT, the economic ripples go beyond the military's direct investment.

The state agency said that every $1 billion in federal military spending creates $1.4 billion in direct and indirect revenue and results in 13,492 in additional jobs.

As one of the state's largest industries behind the state's $12.8 billion-a-year tourism industry, the military directly employed 58,756 statewide in fiscal year 2007-'08, which was up nearly 1 percent from the year-earlier period.

Military dependents and civilian Defense Department employees account for another 50,000 local residents, the report said.

The armed forces also own more than 7,751 buildings, or a total of 46.4 million square feet of space, in Hawai'i.