Updated: October 1, 2023
Relief may be in sight for Hawai’i at-home food prices, gas, new and used cars — and even rent, according to the latest economic forecast released today by University of Hawaiʻi Economic Research Organization.
At-home food over the last couple years spiked 20%, but within the last six months, prices have been completely flat, Carl Bonham, UHERO executive director, said during a news conference Thursday. However, he cautioned that just because prices stopped growing doesn’t mean they are falling.
For Honolulu gasoline, new and used cars, and rents, prices are dropping, though, Bonham said. The insights are based on Hawai’i’s Consumer Price Index (CPI) data, which is only available for the Honolulu metropolitan area.
“Our forecast for overall inflation is that it will continue to come down,” he said.
“Hawai’i’s Soft Landing Still in the Cards,” UHERO’s first quarter 2023 forecast released today, is “a little more optimistic” than the last two reports, mostly because the U.S. economy has held up stronger than economists initially thought.
Bonham said researchers continue to predict the U.S. economy will experience a mild recession in late 2023 or early 2024, but Hawai’i will avoid it.
“That’s a key takeaway,” he said.
Depending on the severity of the U.S. recession, Hawai’i will instead see economic slowing. Domestic travel will soften, and high interest rates and prices will cause local growth to weaken.
Still, the cooling of inflation in Hawai’i and nationally is welcome news, the report said.
“Whether it continues to recede will determine if the Fed pushes interest rates higher and for longer, which could result in a sharper slowdown here,” the report added.
The year-on-year inflation rate for Honolulu was 5.2% in January, down from a peak of 7.5% in March 2022. The CPI in January increased by just 0.5% from July, equivalent to an annualized rate of 1.0%, compared with 4.7% in the previous six-month period, an annualized rate of 9.5%.
The dramatic fall of the annualized six-month inflation rate is primarily due to a drop of 2.6% in the cost of shelter from its September peak, the report said.
Shelter makes up the largest share of the CPI and includes rent, imputed rent of homeowners, and utilities. Several other spending categories have also seen significant declines in prices, reversing earlier gains.
“We continue to tell a story about Hawai’i avoiding a recession — having a significant slowdown in growth but not sliding backward,” Bonham said.