Through the first half of 2011 the price of goods and services in Honolulu as measured by the Consumer Price Index rose 2.5 percent. Over the past twelve months the rate of inflation rose 3.5 percent.
The increase in the CPI was driven primarily by energy prices. The cost of gasoline jumped 17.8 percent from January through June, and 17.1 percent over the past twelve months.
The cost of household energy surged 19.6 percent in the first half of 2011, and 14.7 percent in the past year.
Economist Carl Bonham says the sting of inflation is likely to cause a further drag on local businesses.
“We’re looking at basically very close to no real income growth,” said Bonham, and associate professor and executive director of the University of Hawaii Economic Research Organization. “It gets you close to where you’ve got no increase in purchasing power.”
Many consumers have taken notice of the sharp increase in prices at grocery stores. Debora Lewis of Waikiki spoke to Khon2 after the latest CPI numbers were released.
“I think the most expensive thing that has gone up is the meat and dairy,” said Lewis. “It’s become just absolutely difficult – you have to go shop for the bargains.”
Bonham says the most surprising aspect of the latest inflation reading was the increase in the price of shelter, up 1.9 percent in the first half of 2011, or 1.3 percent over the past twelve months. As renters and homeowners on Oahu feel the squeeze, spending habits are likely to change, which to an extent has already taken place in the past two years.
“People do substitute away from the more expensive items,” explains Bonham. “Maybe they’ll do more entertainment at home instead of a movie out or a dinner out.”
Arlene Johnson, also of Waikiki, has become more of a finicky shopper – not by choice but out of necessity.
"I just buy mostly what I need now, I don’t buy what I want,” she said.
According to the BLS, Oahu resident are paying more for a variety of goods and services in the first half of the year. Recreation rose 3.7 percent, education and communication increased 3.6 percent and the cost of apparel was up 2.4 percent.
The only goods to experience a drop in price over the first half of the year were household furnishings and operations (-4.2 percent) and alcoholic beverages (-0.6 percent).
NEIGHBOR ISLANDS
Neighbor island residents may not have experienced the same spike in the cost of household energy compared to those who live Oahu. Bonham says that’s because energy production is not quite the same outside of Honolulu.
“The neighbor islands are not affected quite as much because they have a larger mix of renewables,” said Bonham. “They’re not using quite as much oil as Oahu is and that’s where the action was.”
The cost of shelter on the neighbor islands may have also remained stable. Bonham says the economies of Maui, Kauai and Hawaii counties are more depressed compared to Oahu’s, resulting in flat or falling prices.
“If you were to measure rents and the cost of shelter it may have actually fallen, whereas on Oahu the shelter component contributed almost one percent to the overall inflation rate.”
OIL LOWER, BUT NOT ENOUGH
Although the price of oil has fallen more than $30 in the past three months to $81 a barrel, Bonham says the decline may not bring much relief to consumers.
“Oil prices are still above where they were a year ago, so it’s not like we’re going to get a tremendous amount of relief in our electric bills,” said the University of Hawaii professor. “Gas prices are going to come down but they’re still going to be higher than they were a year earlier.”
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