Con­sumer prices in Honolulu rose 2.5% last year, driven by higher en­ergy costs

Honolulu Star-Advertiser - - FRONT PAGE - By Dave Se­gal dse­gal@starad­ver­tiser.com

Con­sumer prices in Honolulu rose last year at the fastest pace since 2011, driven by sharp in­creases in the cost of ga­so­line and elec­tric­ity.

The 2.5 per­cent rise in in­fla­tion was only slightly higher, though, than Honolulu’s 20-year his­tor­i­cal av­er­age of 2.3 per­cent and was in line with state econ­o­mists’ fore­casts.

“This is about an av­er­age num­ber,” Eugene Tian, chief econ­o­mist for the state Depart­ment of Busi­ness, Eco­nomic De­vel­op­ment and Tourism, said Fri­day af­ter the data were re­leased by the U.S. Bureau of La­bor Sta­tis­tics. “When the econ­omy grows faster, in­fla­tion grows faster. The in­crease in in­fla­tion was re­ally caused by oil prices. En­ergy it­self in­creased by 7.7 per­cent, and ga­so­line in­creased by dou­ble dig­its. This year we ex­pect a sim­i­lar in­fla­tion rate.”

Hawaii has long been among the lead­ers for the high­est en­ergy costs in the na­tion. The state’s av­er­age price of elec­tric­ity of

29.29 cents per kilo­watthour is the high­est in the na­tion and more than dou­ble the U.S. av­er­age of 12.84. And the cost for reg­u­lar ga­so­line in Hawaii at $3.30 a gal­lon also ranks first in the na­tion and is 78 cents higher than the na­tional av­er­age of $2.52.

The con­sumer price in­dex — the most widely used mea­sure of in­fla­tion — matched the 2.5 per­cent pro­jec­tion for 2017 by DBEDT and was less than the 2.7 per­cent rate fore­cast by the Univer­sity of Hawaii Eco­nomic Re­search Or­ga­ni­za­tion. For 2018, DBEDT is fore­cast­ing an in­fla­tion rate of 2.3 per­cent, and UHERO is pre­dict­ing 3.1 per­cent.

Tian ex­pects there to be lit­tle ef­fect on cus­tomers’ pur­chas­ing power with the ris­ing in­fla­tion be­cause per­sonal in­come growth through the first three quar­ters of 2017 — the most re­cent data avail­able — was 2.6 per­cent. With in­fla­tion at 2.5 per­cent, that meant in­fla­tion-ad­justed in­come growth was mi­nus­cule at just 0.1 per­cent.

Ira Gor­don, owner and prin­ci­pal bro­ker of Honolulu real es­tate com­pany Aloha Homes, said he’s no­ticed gas prices go­ing up but that he hasn’t changed his lifestyle be­cause of higher en­ergy prices.

“I con­serve the nor­mal stuff; I don’t leave the lights on,” he said. “But I don’t do any­thing out of the or­di­nary.”

High en­ergy prices have kept Honolulu’s in­fla­tion rate above the U.S. av­er­age ev­ery year since 2004 ex­cept for 2014, when Honolulu’s in­fla­tion rate was

1.4 per­cent and the U.S. rate was 1.6 per­cent. In

2017 the U.S. in­fla­tion rate was 2.1 per­cent, four-tenths of a per­cent­age point be­low the Honolulu rate. The last time Honolulu’s in­fla­tion rate climbed above 2.5 per­cent was 2011, when it was 3.7 per­cent. Over the last 20 years, the peak for Honolulu in­fla­tion was 5.9 per­cent in 2006 — the year be­fore the re­ces­sion.

Gas prices rose 10 per­cent in the sec­ond half of 2017 from the same pe­riod a year ago while elec­tric­ity prices in­creased 5.9 per­cent. That left the over­all en­ergy cat­e­gory up 7.7 per­cent. Shel­ter, which cov­ers the cost of rent and own­ers’ equiv­a­lent of rent, gained 4.1 per­cent. Shel­ter com­prises about one-third of the in­dex.

Other in­creases were seen in food and bev­er­ages (2.9 per­cent), trans­porta­tion (2.8 per­cent), med­i­cal care (2 per­cent), al­co­holic bev­er­ages (1.5 per­cent), ap­parel (1.5 per­cent) and recre­ation (0.5 per­cent). The ed­u­ca­tion and com­mu­ni­ca­tion cat­e­gory fell

3.6 per­cent.

Tian, whose agency will re­lease its next eco­nomic fore­cast Feb. 8, ex­pects fed­eral tax cuts that take ef­fect this year could boost in­fla­tion be­cause con­sumers will have more dis­pos­able in­come. But he said in­fla­tion could be par­tially off­set by a slow­ing in the in­crease of gas prices.

“The fed­eral tax cuts will have up­ward pres­sure on in­fla­tion and will be re­flected in 2018,” he said.

Source: U.S. Bureau of La­bor Sta­tis­tics

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