Food prices rise, but inflation low

By Susan Hooper
Advertiser Staff Writer

As her 12-year-old son, Chris, pushed an overburdened grocery cart through the Safeway Beretania parking lot yesterday, Julie Lin stopped for a moment to talk about consumer prices in Honolulu.

"I think the prices are going up on all your groceries — everything," said Lin, 38, who moved to Honolulu from Taiwan with her husband and three children two years ago.

Her family gulps down five or six gallons of milk a week, so Lin is always on the lookout for specials. But if she's unsuccessful, she doesn't cut back.

"It's good for them, so I just keep buying," she said.

Lin's observation about grocery costs squares with that of the U.S. Department of Labor's Bureau of Labor Statistics, which yesterday released inflation figures for Honolulu.

Grocery prices rose 4.3 percent in the first half of the year, a higher jump than for any other category measured in that period. But overall, consumer prices in Honolulu were up a scant 0.8 percent from January to June, the Labor Department said.

The figure is so low that analysts here expressed concern that it could be yet another sign of growing weakness in Hawai'i's economy.

Low inflation can be a boon for consumers, because it means that prices are not rising. But it can also signal a stagnant economy, in which businesses hold off raising prices because the demand for goods is not strong.

"It definitely does not show a booming economy," Pearl Imada Iboshi, an economist with the state Department of Business, Economic Development and Tourism, said of the Honolulu inflation figures.

"It's good for consumer prices, but it shows relatively weak (consumer) demand."

Prices rose 1.3 percent in Ho-nolulu from the first half of 2000 to the first half of this year, the Labor Department said. That compares to national inflation of 3.4 percent for the same period.

However, consumer prices nationally registered the biggest decline in 15 years last month, falling 0.3 percent, the Labor Department said yesterday. The decline was attributed in large part to the sharp drop in the cost of gasoline and other energy products.

Hawai'i economists said they had been expecting a higher inflation rate for Honolulu. In particular, Imada Iboshi said, residential rents have been rising, but that was not reflected in the data, which showed an increase of just 0.3 percent in residential rents for the first half of 2001.

The state's forecast for inflation in Hawai'i this year is 2 percent, Imada Iboshi said — a slightly higher figure than the actual statewide inflation rate of 1.7 percent in 2000.

"Our inflation rate has been lower than the United States rate for some time now and we didn't expect it to go up to 3 percent (this year)," she said. "We were expecting more in the area of 2 percent, so we have half a year to do that."

Nancy Treadwell, regional economist with the Bureau of Labor Statistics in San Francisco, described Honolulu's latest inflation figure as "a mild increase."

Higher prices in transportation and food and beverage dominated, she said.

The greatest drop was in apparel prices, which declined 2.8 percent in the first half of the year and 4.6 percent from the first half of 2000 to the first half of this year. Analysts attribute the change to the growing presence of discount retailers in Honolulu.

One Honolulu area apparel merchant, however, said she has not been able to lower her prices.

"I don't see that yet," said Flo Hihara, owner of Flo's Sportswear on Farrington Highway in Waipahu. The wholesale prices Hihara pays for her ladies' dresses and sportswear have not come down, she said, so she cannot drop her retail prices either.

"If the prices come down, I can lower it, but right now the wholesale is not lower," said Hihara, who has owned her shop for more than 40 years and makes about four buying trips a year to the West Coast. "I hope it comes down so I can sell it cheaper. The customers will be happy. We're not taking too much mark-up, but still I hope the wholesale comes down."

Carl Bonham, executive director of the University of Hawai'i Economic Research Organization, said the latest Honolulu inflation figures were lower than he had anticipated.

"It's a little surprising," he said. "It's consistent with some of the slowing growth in tourism, the slowing growth in the job counts, and sort of the waning effect of higher oil prices, and so that all makes sense. But what surprises me is that we're still not seeing what has to be the rising costs of rents."

Lin, who rents a two-bedroom apartment on Kapiolani Boulevard, said that her observation is that rent prices in Honolulu are not rising.

"I know the rent is going down — because you can bargain now," she said.

Reach Susan Hooper at shooper@honoluluadvertiser.com or 525-8064.