Honolulu inflation doubled to 2 percent last year despite lower energy costs as consumer prices rose at the fastest pace since 2012.

But state economist Eugene Tian said consumers’ purchasing power remains strong because of rising personal income and an inflation rate that is still lower than Hawaii’s historical average.

The consumer price index — the most widely used measure of inflation — rose for Honolulu from 1 percent in 2015 and marked the largest year-over-year increase since gaining 2.4 percent in 2012, according to data released Wednesday by the U.S. Bureau of Labor Statistics.

“Although it is double from last year, it is still lower than the 20-year average of 2.2 percent from 1995 to 2015,” said Tian, the chief economist for the state Department of Business, Economic Development and Tourism. “Consumers’ money still has higher purchasing power because DBEDT’s estimate for personal income growth is 4.9 percent for 2016. So if you’re looking at 2 percent inflation, consumers still have 2.9 percent of real (inflation-adjusted) income.”

Tian said the inflation rate rose partly because the decrease in energy prices from 2015 to 2016 wasn’t as large as it was from 2014 to 2015.

“The increase is not surprising because 2015 was mainly low because of oil prices,” Tian said. “We expect inflation will be higher this year because of government policies on money supply and federal government spending. The Federal Reserve is expected to raise interest rates three times in 2017 after raising them twice in 2016.”

Over the 12 months, apparel (up 4.5 percent), shelter (up 3.7 percent) and medical care (up 2.2 percent) drove inflation higher. That was partially offset by a 4.9 percent decline in energy prices led by gasoline (down 4.7 percent) and electricity (off 4.6 percent). Shelter, which covers the cost of rent and owners’ equivalent of rent, comprises about one-third of the index.

Despite the historically low inflation number, Hawaii exceeded the average U.S. inflation rate of 1.3 percent for 2016. Hawaii has had a higher inflation rate than the U.S. every year since 2004 with the exception of 2014.

The increase wasn’t a surprise to local economists, who had been forecasting inflation to rise for 2016. DBEDT was predicting an average 2.3 percent rise while the University of Hawaii Economic Research Organization was forecasting a 2.4 percent increase.

In their latest reports, DBEDT was expecting a 2.6 percent increase for 2017 and UHERO was forecasting a 3.3 percent gain. DBEDT and UHERO are due to release updated reports next month.

“The increase is not surprising because 2015 was low inflation (versus 2014) because of energy,” Tian said. “Energy prices in 2016 compared with 2015 wasn’t a big decrease.”

Inflation rose 1.5 percent during the second half of last year from the same period in 2015 but inched up just 0.9 percent from the first half of 2016. Core inflation, which excludes food and energy, increased 2.3 percent during the second half of the year from the year-earlier period and was up 0.9 percent from the first half of the year.

Tian said Honolulu’s inflation rate for the year came out lower than DBEDT’s forecast because of several categories that were virtually flat in the second half of the year compared with the first six months of 2016. Those included food and beverages (down 0.2 percent), medical care (up 0.6 percent), recreation (up 0.7 percent), education and communication (down 0.4 percent), and other goods and services (up 0.4 percent). Energy prices, though, rose during the second half of the year from the first half with the cost of gasoline up 11.1 percent and electricity up 5.1 percent.

Retired Honolulu police officer Doug Miller, a lifetime Kailua resident, said he hasn’t seen any signs of inflation as it relates to food prices.

“I’m very price conscious,” he said. “I look at the Wednesday ads in MidWeek for Longs, Times, Foodland and Safeway and I actually shop at all three (supermarkets) based on which particular item has the better price. Prices certainly do vary between the three supermarkets we have in Kailua and I can pretty accurately say that I haven’t sensed any significant increase over the past year.”

Miller, who has had investment properties in Kailua for 20-plus years, acknowledges that rents have been going up, however.

“We have been able to raise our prices in that span,” he said. “There’s no question the rents have gone up quite significantly, especially lately. It’s always been pretty steady, but more gradual kind of increase. With the result of this red-hot sellers’ market, invariably the rental market has to follow pretty much in lockstep as prices go up in purchasing a house. A lot of those purchases are from investment people, and to pay the higher mortgage, the rent has to go up.”