Oahu prices rise
slightly more than
national rate

Honolulu's inflation still
has been lower than
expected this year

Oahu consumer inflation exceeded the national and Western region inflation rates in the first half of the year, with a surge in housing and gas costs boosting the island's consumer price index 3.1 percent from the year earlier.

But Bank of Hawaii chief economist Paul Brewbaker, who is expecting Hawaii consumer prices to increase 4 percent this year, called Oahu's inflation "unbelievably low."

"Housing came in exactly where we thought it would be and transportation, because of fuel costs, came in right where we thought at about 4 percent," he said. "That means the other half of the index is experiencing much lower inflation than we expected and ... my one explanation for that is globalization."

By globalization, Brewbaker means Hawaii welcomed more big-box retailers such as Wal-Mart, Best Buy, Home Depot and Costco that have a gateway to inexpensive foreign manufacturing.

Prices on Oahu rose 1.6 percent in the first six months of this year from the second half of 2004, according to data released yesterday by the U.S. Bureau of Labor Statistics.

On an annual basis, Oahu's prices increased 3.1 percent, greater than the 3 percent national inflation rate and the 2.7 percent rise in the West.

Oahu's inflation was below the full-year 2005 gains forecast by other Hawaii economists.

The University of Hawaii Economic Research Organization is forecasting a full-year increase of 3.8 percent. Leroy Laney, a First Hawaiian Bank economics consultant and Hawaii Pacific University professor, is predicting 3.7 percent. And the Department of Business, Economic Development & Tourism is forecasting 3.2 percent.

Gas prices, which comprise just 3 percent of the weighted index, rose 13.9 percent from the same period a year ago and increased 4 percent during the last six months. Prices for the broader transportation segment, which is 15 percent of the index, gained 4.4 percent over the year and 2 percent in the last six months.

Housing, which accounts for 43 percent of the index, rose 4 percent from the first half of 2004 and increased 1.8 percent from the second half of last year. The housing index includes the expense of renting or owning a home, as well as the cost of furnishings, utilities and other expenses.

"It all boils down to supply and demand, and where there are limited resources, you have more people competing for those goods and that tends to make prices rise faster," Bureau of Labor Statistics spokeswoman Charlotte Yee said.

In other areas, food and beverage prices on Oahu rose 2.9 percent from a year earlier. Apparel prices advanced 2.2 percent from a year ago.

Recreation prices, which include leisure electronics such as televisions and DVDs, decreased 4 percent from a year earlier.