The purchasing power of Honolulu residents took a major hit last year as the inflation rate jumped to 5.9 percent, the highest rate in 15 years.

Economists had expected inflation to slow during the last six months of 2006 after an unexpectedly high rise during the first half of last year. However, that slowdown didn't occur, primarily because of rising housing and food costs, according to the U.S. Department of Labor.

The Honolulu inflation rate was up from 3.8 percent in 2005 and represented the fastest rise in prices since 1991, when the consumer price index jumped 7.2 percent.

Going forward, Hawai'i residents can expect continued high inflation, according to analysts. "It will continue for the next several years," said University of Hawai'i economist Carl Bonham.

The Honolulu inflation rate was more than double the national rate of 2.5 percent in 2006.

For residents, particularly those on fixed incomes, high inflation threatens to wipe out any increase in income during the last year. Indeed, inflation-adjusted personal income growth likely was flat during 2006, according to economists.

"Certainly there's been an increase, and it seems to me it comes close to wiping out most of any cost-of-living increases," said Robert Sandla, a military retiree in Honolulu.

Sandla said state and city officials could take steps to lower property and gasoline taxes that could help control inflation.

"Those are the key things that we've noticed, and they are two items that are controllable," he said.

Higher prices are a byproduct of Hawai'i's growing economy, which has led to higher prices for homes as well as other goods and services. During 2006, shelter costs, which represent about 30 percent of overall costs, rose 9.4 percent. Food costs rose 4.6 percent, while transportation costs rose 5.5 percent.

The rate of increase in shelter costs was expected to slow during the second half of last year as Hawai'i's hot real estate market cooled. Instead, shelter cost increases accelerated.

"We did not expect it to increase as much as it did in the first half of the year," said Pearl Imada Iboshi, the state's chief economist. "But we saw increases across the board."

Local economists had expected inflation to rise a little more than 5 percent in 2006. So yesterday's 5.9 percent figure "does represent a surprise," Bonham said.

After the first six months of 2006, "we thought we might have seen a peak in the pass-through of higher housing prices," Bonham said. "That didn't happen, and that's reflected in the consumer price index increase."

The Consumer Price Index for Honolulu now stands at 209.4. This means that a basket of goods that cost $100 between 1982 and 1984 now costs $209.40.

The index is the basis for computing cost-of-living raises in many union contracts.

Reach Sean Hao at shao@honoluluadvertiser.com.