Tuesday, August 17, 1999

Isle prices on
upswing after
year of deflation

Honolulu's Consumer Price
Index rises 1% from the
last half of 1998

By Rob Perez


Art After a year of deflation, Oahu prices are on the upswing.

The federal government said today that Honolulu's Consumer Price Index for the first six months of this year rose 1 percent from the last half of 1998 and 0.4 percent compared with the year-earlier period. The increases came on the heels of 0.2 percent price decline for all of 1998 -- the first time that has happened since the federal government began tracking Honolulu's index in 1963.

Rising food and beverage prices accounted for nearly half of the CPI's latest increase, according to the Bureau of Labor Statistics, which compiles the numbers.

That category jumped 2.7 percent from the last half of 1998 and 1.5 percent compared with the year-earlier period, the bureau said.

But housing costs, which represent about 40 percent of the index, continued to fall, although by smaller amounts. For the year, housing costs fell 0.5 percent; they were down 0.1 percent from the previous six months.

Leroy Laney, a Hawaii Pacific University economics professor, said he was puzzled by the jump in food prices, especially given that housing costs still are falling.

Whatever is driving the jump in prices, Laney expects Honolulu's inflation rate to remain milder than the national rate, which is 2.4 percent so far this year.

"This could be taken as some sign of mild improvement in the economy," Laney said.

Pearl Imada Iboshi, the state's chief economist, saw good and bad news in the numbers.

The mild inflation means some components of the CPI still are falling, and people like lower prices, she said.

But low prices mean demand is weak, which means the economy isn't doing that great, Iboshi said.

Like Laney, she said the housing component is the key indicator to watch.

"I think part of the story is that housing, even though it's continuing to decline, is not declining by as much," she said.

The federal government said increasing education and communication costs also helped push up Honolulu's overall index.

For the year, that category rose 3.7 percent and increased 3.3 percent from the last half of 1998.

Another big contributor: A 7.7 percent year-over-year rise in "other goods and services," a category that includes such things as tobacco products, personal care, dry cleaning and legal services.

In the first half of this year, prices in that group jumped 6.2 percent.

One of the biggest declines on a year-over-year basis was in gasoline prices. They fell 7.2 percent.

Alcoholic beverages also dropped 3.7 percent from a year ago, while apparel prices fell 8.9 percent, according to the bureau.

Household furnishings also continued to drop, falling 2 percent for the year.

Rents dropped 0.8 percent on a year-over-year basis, and electricity fell 2.3 percent.

On the rise were medical care, up 3.8 percent compared with a year ago, and grocery prices, up a mild 0.7 percent.

Laney said the numbers may indicate that the deflation trend is over in Hawaii, although he doesn't expect big price increases ahead.

"If this has turned, I think it's going to continue to increase maybe just a little," he said.

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