Honolulu inflation remained near historic lows last year amid declining electric bills and cheaper prices at the gas pump.
The consumer price index — the most widely used measure of inflation — rose just 1 percent in 2015, according to data released Wednesday by the U.S. Bureau of Labor Statistics.
It was the smallest annual increase since 2009, during the Great Recession, when inflation edged up 0.5 percent. Still, Honolulu’s inflation was well above the 0.1 percent rate for all of the United States. Prices were up for health care, education and food.
“Wherever it helps, (the savings from low inflation) is consumed by the stuff that goes up,” said Jon Goo, a building inspector for the City and County of Honolulu.
“We’re aging so we’re taking more pills and seeing the doctor a little bit more than when we were young,” said the 54-year-old Goo. “And, of course, college. Shane (his son) is out of state and all we’re working for is tuition. And I have one more in high school. There’s no extra money.”
Inflation rose 1.3 percent during the second half of last year from the same period in 2014 and was up 1.8 percent from the first half of 2015. During the first half of 2015, inflation was up 0.7 percent from the same period in 2014.
The main drivers for the low inflation during the second half of last year were gasoline prices, which dropped 29.7 percent from the year-earlier period, and electricity, which fell 22.1 percent because 70 percent of electricity in the state is generated by petroleum.
“We increased a lot over the U.S. in terms of medical care (up 10.6 percent in Hawaii in the second half of 2015), recreation (2.8 percent), education and communication (3 percent), other goods and services (3.8 percent) and food and beverages (4.4 percent). So we are lower in energy-related spending but we are higher in others,” said Eugene Tian, chief economist for the state Department of Business, Economic Development and Tourism.
Despite the two big energy-related drops, Honolulu’s inflation wasn’t lower because gas and electricity make up only 3.8 percent and 3 percent, respectively, of the consumer price index.
Shelter, which covers the cost of rent and owners’ equivalent of rent, comprises 37.6 percent of the index. Food and beverages make up 15.4 percent of the index while education and communication has an
8.1 percent share and medical care is at 7.4 percent.
Goo said he’s seen very little impact to his own financial situation from the low inflation.
“Even though the gas prices dropped, airline prices didn’t,” Goo said. “It’s true that the dollar stretches a little further now because most of us use our cars to travel and we’re using our cars every day, but it doesn’t make up enough. There’s a little extra money saved from before, but health care keeps going up and up, and so, to me, it negates it.”
Goo said he’s not affected by lower monthly electric bills because he recently spent $25,000 for a photovoltaic system on his Kailua home.
“I haven’t seen the recovery yet because the photovoltaic is new, but hopefully the $300 to $400 a month (in electricity savings) I can use for my retirement after I pay it off,” he said. “But it’s going to be a while.”
DBEDT, which had forecast 1 percent inflation for 2015, predicts that Honolulu inflation will rise this year to its recent historical norm of 2.3 percent, which was achieved from 1994 to 2014. The 30-year inflation rate in Honolulu from 1984 to 2014 was 3.2 percent.
“We actually feel that oil prices may go up later this year even though the commodity is still going down,” Tian said. “We expect later in the year we’ll be going back to normal.”
