Honolulu residents are getting some relief from rising prices, according to the latest government data that show the city's inflation rate eased to 5.0 percent during the first half of this year after hitting a 15-year high in 2006.

Increases in the cost of shelter, electricity and gasoline all slowed when compared with full-year 2006, according to figures released yesterday by the Bureau of Labor Statistics.

Honolulu's inflation rate is expected to continue slowing from last year's 5.8 percent. Economists are forecasting the Consumer Price Index to increase between 4.5 percent and 5 percent for all of 2007.

A slowing of growth in key sectors such as construction and tourism are expected to help put the brakes on inflation in the coming years.

"This thing as expected is burning off," said said Paul Brewbaker, Bank of Hawaii's chief economist, referring to housing price increases. "It's reasonable to expect moving forward that (inflation) is coming down to 4 percent, then 3 percent" over the next few years.

University of Hawai'i economist Byron Gangnes agreed that last year's spike in the cost of living was likely a peak and that annual inflation increases should eventually drop to 3 percent to 3.5 percent.

"The good news here is that the overall pace of inflation is slowing," he said. "It may take a few years before we return to rates we're used to, but we seem to be moving in that direction."

Despite slowing, or even stagnating economic conditions, Hawai'i is still expected to face tight labor markets and relatively strong job growth.

Higher prices are a byproduct of Hawai'i's strong economy, which has posted above-trend growth in recent years.

During the first six months of this year, electricity costs fell 6.8 percent compared with an increase of 13.8 percent in 2006.

Gasoline costs rose 1.5 percent after increasing 14.9 percent last year.

Shelter, which represents 38 percent of overall costs, rose 9.3 percent, down from 9.4 percent in 2006.

For residents, particularly those on fixed incomes, high inflation is damaging because it erodes increases in income. Personal incomes of Hawai'i residents rose 6.1 percent in the first quarter before adjustment for inflation compared with the first three months of 2006, according to the U.S. Bureau of Economic Analysis. Inflation-adjusted personal income growth this year is expected to range from 1.4 percent to 1.8 percent, according to local economists.

Honolulu's 5.0 percent rise in the cost of living was only eclipsed by the Tampa-St. Petersburg-Clearwater, Fla., metro area, which experienced year-over-year inflation growth of 5.2 percent.

The Consumer Price Index for Honolulu now stands at 216.6. This means that a basket of goods that cost $100 between 1982 and 1984 now costs $216.60. The index is the basis for computing cost-of-living raises in many union contracts.

Reach Sean Hao at shao@honoluluadvertiser.com.