The consumer price index for Honolulu rose 2.3 percent last year, which was the highest annual gain since a 2.7 percent spike in 1994, according to figures recently released by the U.S. Bureau of Labor Statistics. Much of the gain came during the second half of the year with housing and rent — two sizeable components of the index — rising sharply. Gasoline prices rose by nearly 20 percent in the last six months of 2003.

"We knew that was out there," said University of Hawai'i economist Carl Bonham of higher gasoline prices. "But the change in the cost of housing component is a much, much bigger impact on people’s budgets."

The rise in the cost of living was expected, given rising home and real estate prices, Bonham said. Inflation likely will rise at a similar, if not slightly higher rate this year, he added.

Robust demand for homes amid dwindling available inventory pushed the median price for an O'ahu house to $400,000 last month, a record that industry experts expect may be broken again this year.

"The direction is up and primarily based on rising housing costs and rent costs," Bonham said.

Honolulu’s consumer price index for the second half of the year stood at 185.7, meaning a basket of goods costing $100 from 1982 to 1984 would have cost $185.70 during the last six months of 2003. Between the second half of 2002 and 2003 the cost of food and beverages rose 2.6 percent, housing costs increased 3.2 percent and transportation costs jumped 4.5 percent. The cost of apparel fell 1.3 percent.