Honolulu inflation heating up as prices have risen over the past year

Prices for food, housing, transportation and other things have been rising on Oahu over the past year, according to a new federal report, but the overall increase trails the national average.

The U.S. Bureau of Labor Statistics released data Thursday showing costs for goods and services in Honolulu rose 3.8% over 12 months through May, driven largely by the price of gasoline and used cars.

Honolulu’s consumer price index over the past 10 years has ranged from 1% to 3.7% and averaged 2% for the decade. The last time the annual figure was over 3.8% was in 2008 at 4.3%.

However, the rise in Honolulu’s consumer price index was below a 5% increase nationally that represented the highest 12-month U.S. gain since 2008.

Prices in Honolulu over the period rose the most for gas and for used cars and trucks, which soared 34.7% and 29.2%, respectively.

Costs also rose 2.6% for electricity, 2.7% for housing, 1.2% for food, 3.6% for new cars and 4.1% for education and communication.

The only major category with a decrease was apparel, where prices slipped 1%, the report showed.

BLS also reported that Honolulu’s consumer price index, a general measure of inflation, rose 2.1% between March and May.

Higher prices during both periods are largely a result of increasing consumer demand outstripping supply for many items, including appliances, new cars and certain foods because shortages of materials or labor have slowed production and led sellers to raise prices.

“The inflation rates are expected to be high in 2021 both for the nation and Hawaii due to the sharp increase in demand and lacking supply,” said Eugene Tian, chief economist at the state Department of Business, Economic Development and Tourism.

Higher inflation this year compared with historical averages also reflects costs for some goods being depressed last year as the intense spread of COVID-19, business shutdowns and job losses inhibited consumer spending.

“People have income but did not have good chances to spend the money,” Tian said.

BLS reported in May 2020 that Honolulu prices over the prior 12 months edged up 1.3%, compared with 2.1% in the same period a year before.

Tian also noted that inflation was 4% during the second half of 2011.

DBEDT expects Honolulu inflation this year will rise 2.5%, up from 1.6% last year.

BLS calculates consumer prices only for major urban areas, collecting price data on a fixed selection of goods and services from about 6,000 households and 22,000 retail establishments in 75 cities.

Inflation tends to be more painful for consumers on fixed incomes, such as retirees, though not everyone is affected equally. For instance, people who don’t drive can avoid paying dramatically more for gas.

Tian pointed out that the biggest component of inflation in Honolulu over the 12 months through May was fuel, which he said was mainly driven by the average price of crude oil hitting about $65 a barrel in May, compared with about $28 a year earlier.

In conjunction, the average price for a gallon of regular gas in Honolulu was $3.87 in May, up from $3.18 a year earlier. On Thursday the price was $3.90.