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Monday, July 28, 2014         

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Modest inflation called typical in early stages of recovery

By Alan Yonan Jr.

POSTED:


Inflation accelerated slightly in Honolulu last year, fueled by increases in the cost of electricity and gasoline.

The Consumer Price Index rose by 1.7 percent in 2010, up from a 0.7 percent increase in 2009 when economic activity was stifled by the recession.

Honolulu's inflation rate for 2010 compared with a 1.2 percent average increase for all U.S. cities during the same period, according to the U.S. Bureau of Labor Statistics.

The main drivers in the 2010 Honolulu increase were a 13.1 percent jump in the price of electricity and a 6 percent increase in gasoline prices, the BLS reported. But the increase in the overall index was moderated by more subdued increases in other key areas like housing and food.

The shelter component of the index, which covers the cost to own or rent a home, was unchanged in 2010. Overall housing costs, which include furnishings and energy costs, rose 0.9 percent. Food and beverage costs rose just 0.5 percent.

BLS economist Todd Johnson said the modest inflation in Honolulu is typical for the early stages of a recovery when economic activity is still subdued.

"Honolulu is not in danger of overheating at all," Johnson said, noting that the city's inflation rate was within the Federal Reserve's "comfort range" of 2 percent.

"When it creeps up into the higher 3-to-4 percent range, it tends to outpace wage increases, and people begin to fall behind," he said.

The University of Hawaii Economic Research Organization expects inflation will remain in check for the foreseeable future, rising 1.4 percent in 2011, 2.6 percent in 2012 and 2.5 percent in 2013.

Hawaiian Electric Co.'s customers in Honolulu have seen their bills rise in recent years due to a combination of factors. HECO raised rates last year to pay for various capital improvements, including part of the cost of its new $196 million Campbell Industrial Park generating station that burns biodiesel. There have also been increases in fuel costs and a fee paid by ratepayers to cover the cost of the state's energy-efficiency program.

Richard Ching, a retired accountant and small-business man who lives in Kuliouou, said he and his wife have worked hard to keep their electricity bill down as rates have climbed upward.

"We put a timer on our water heater and find that to be quite helpful," said Ching, 67.

"We also put in CFL bulbs. We try to be conscientious. We also put cutoff switches on the power cords of all our appliances so they won't be draining power when we aren't using them."

To counter rising food prices, Ching has increased the amount of shopping he does in Chinatown, where he said prices are generally lower than in the major grocery stores.

The agency reports the Consumer Price Index for metropolitan areas twice a year, comparing the most recent six-month period with the same period six months earlier and a year earlier. Economists consider the annual comparison more meaningful. The increase in the Honolulu CPI between June and December 2010 was 0.9 percent.






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