The cost of living in the city rose 3.1 percent compared with the first six months of 2004, according to figures released today by the U.S. Department of Labor. That's slightly lower than last year when rising home and fuel prices drove inflation to 3.3 percent – its highest rate since 1992.

Higher prices are partly a byproduct of Hawai'i's economy, which is benefiting from robust real estate and construction and near-record tourism. That means job stability and new jobs, but also an increase in the cost of living. In Honolulu, housing costs rose 4 percent, which was below last year's 4.6 percent rise, while gasoline prices increased 13.9 percent, versus 13.8 percent last year.

While relatively high, the rise in inflation remains lower than full-year forecasts, which predict rising or level inflation this year. That could ease concern that Hawai'i's economy may be overheating. Nationally, consumer prices rose 3.0 percent during the first half of this year.

The cost of living "continues to increase, but not at an accelerating rate," said state economist Pearl Imada Iboshi. "It's pretty much what we expected it to be."