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The Honolulu Advertiser
Posted on: Saturday, August 16, 2003

Hawai'i inflation up, but so is income

By Sean Hao
Advertiser Staff Writer

Inflation in Honolulu rose 1.6 percent through the first six months of the year, compared with the last half of 2002, as higher utility, gasoline and education costs raised the cost of living on O'ahu.

The U.S. Department of Labor said Honolulu's consumer price index for the first half of the year stood at 183.2, meaning a basket of goods costing $100 from 1982 to 1984 now costs $183.20.

The rise was pegged to increases in electricity and natural-gas prices, which resulted partly from oil supply concerns relating to the war in Iraq. Electricity prices rose 6.2 percent while natural gas prices jumped 26.1 percent, and gasoline prices rose 12.8 percent in the first six months of the year. Byron Gangnes, at the UH Economic Research Organization, said the loss of consumer purchasing power because of higher energy prices was anticipated, but may be temporary because energy prices have since subsided.

"The energy situation, that may be just a one-off thing," he said.

Also driving up costs was a 2.2 percent rise in the education and communication component of the index.

For Hawai'i consumers, the rise in the rate of inflation comes at a time when incomes are also rising strongly. Personal incomes in Hawai'i rose by 5.5 percent in the first quarter compared with the same period a year ago, according to U.S. Bureau of Economic Analysis released last month.

"Personal real income has grown sharply and we expect that to continue," Gangnes said. "The biggies are the construction and housing industries. Those have been the really strong areas."

Meanwhile, the UH Economic Research Association expects the inflation rate to rise 1.6 percent this year and 2.5 percent next year, in part because of rising home values.

"We still keep expecting higher home prices to filter in to higher housing costs, so that's probably going to start happening soon," Gangnes said.

Reach Sean Hao at shao@honoluluadvertiser.com or 525-8093.