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Isle inflation
rate up 1.9% as
economy strengthens

Economists say the moderate
rise, led by higher gas prices,
is another sign Hawaii's
economy is rebounding

---

By Rob Perez
Star-Bulletin

Buoyed by higher gas prices, Oahu inflation in the first half of the year rose 1.9 percent, the federal government said today.

Economists said the moderate increase was another sign that Hawaii's economy is continuing to rebound after little growth throughout the 1990s.

"The economy is definitely improving," said Leroy Laney, a Hawaii Pacific University economics professor. "We're seeing signs of that everywhere."

Almost all categories of Honolulu's Consumer Price Index rose in the first half of this year compared with the same period in 1999, according to the U.S. Department of Labor's Bureau of Labor Statistics.

The 1.9 percent increase from the first half of 1999 was in line with what most economists were projecting.

"That's almost exactly where we expected it," said Pearl Imada Iboshi, chief economist for the state Department of Business, Economic Development & Tourism. Her agency is projecting a 2.0 percent inflation rate for all of 2000 for Oahu.

Nationally, the inflation rate was 3.5 percent on a seasonally unadjusted basis for the first seven months of the year.

Compared with the last half of 1999, the Oahu rate was up 1.2 percent in the first six months of this year.

Economists said Oahu's moderate inflation was good for the economy, showing increasing demand for goods and services but not to such an extent that prices will jump dramatically.

Compared with the first six months of 1999, local transportation costs surged 3.3 percent, largely because gasoline prices were up 10.7 percent -- the biggest increase since the last half of 1987, the bureau said.

Housing costs edged up 1 percent, but rent for primary residences was down 1.3 percent, surprising some economists.

Iboshi said she expected rents to be flat or even slightly up because housing prices in general have started rebounding.

Prices for fuels and utilities also jumped, rising 11.7 percent from a year ago. Electricity was up 15.1 percent.

Compared with the year-earlier period, prices for medical care jumped 2.1 percent in the first half of 2000, recreation was up 1.8 percent and education and communication services surged 4.6 percent. Food and beverages rose 1.9 percent, although alcoholic beverages, one component of that category, fell 0.2 percent, according to the data.

The only category showing signs of falling prices from a year ago and from the previous six months was apparel, the bureau said. That category was down 1.4 percent from a year earlier and 0.4 percent from the second half of 1999.

Oahu's so-called core inflation rate -- minus the food and energy categories, considered fairly volatile -- was up 1.2 percent compared with the first six months of 1999.

Economics consultant David Ramsour said the increasing levels of inflation, while still moderate, are a sign that Hawaii's labor markets are tightening.

For all of 1999, Oahu's consumer prices rose 1 percent. In 1998, they fell 0.2 percent -- the first full year of deflation since the federal government began tracking Honolulu's index in 1963.

One reason inflation remained so low in recent years was because most cargo and freight movers to Hawaii had significant excess capacity, Ramsour said.

But that slowly has changed as the economy has improved and demand for goods has risen, he said. "If prices are being pushed now, that excess capacity has been used up."