Honolulu inflation mild despite China trade war

Inflation in Honolulu remained mild in recent months despite effects from the U.S.-Chinese trade war, which caused apparel costs in Honolulu to skyrocket.

With economic growth slowing statewide, Honolulu inflation for the 12-month period that ended in July came in at 1.6%, according to data released Tuesday by the federal Bureau of Labor Statistics. That is far below Honolulu’s 20-year historical average of 2.4% and less than the 1.9% inflation level for all of 2018. It is also currently below the 1.7% inflation mark that the state Department of Business, Economic Development and Tourism forecast in May for all of this year.

“We’re still very high for prices, but this one-year change is small,” DBEDT chief economist Eugene Tian said. “The lower inflation rate is consistent with the lower economic growth rate. When the economic growth rate is lower, inflation is usually low.”

Honolulu’s 1.6% inflation, measured by the consumer price index, was lower during the last 12 months than the entire U.S. at 1.8% as well as the West Region at 2.7% and Los Angeles at 3.3%.

Despite Honolulu’s low inflation, the cost for apparel soared 11.3% and represented the largest increase of any category.

“This is the impact of the China tariffs,” Tian said. “During 2018, inflation for apparel decreased 4.8%.”

Waialae-Kahala resident Naomi Cooper, who conducts modeling and marketing services, said she has noticed the cost increasing for some apparel, which comprises 2% of the consumer price index.

“In the larger department stores I haven’t seen a difference because I often shop at Macy’s, Macys.com and I’m a bargain person,” she said. “But I do know that the smaller boutiques or the brand labels that I buy online are more expensive. The last year I’ve seen a much higher cost for private labels, boutiques, that kind of apparel line. I have noticed that fabrics or the quality has been compromised a little bit. They may not necessarily raise their prices, but they are not as high-quality as they could be. It might not just be the fabric, but it may be a certain kind of metal in their zippers, or their buttons, so it’s not as noticed. It’s not as high-class a fashion.”

Honolulu is on pace to finish the year at its lowest inflation level since 2015 when it was just 1% after hitting 2% in 2016, 2.5% in 2017 and 1.9% in 2018.

Tian said the low inflation has been mainly driven by a decrease in oil prices. Crude oil prices decreased 18.4% from July 2018 to July 2019. As a result, Honolulu’s consumer inflation for transportation decreased 1.7% over the same period while inflation for energy increased only 0.3%.

Shelter, which comprises about 40% of the Honolulu index and covers the cost of rent and owners’ equivalent of rent, rose 2.4% over the past year while food and beverages increased 2.3%.