Take a stroll through Foodland’s Kahala Market, and you’ll see numerous signs of the times: $6.99 for a gallon of low-fat milk, $4.79 for a dozen large eggs and just under $10 for a loaf of Dave’s Killer Bread – on sale. Meanwhile, a fresh honeydew melon will cost you north of $12.
Foodland’s specialty grocery store is hardly known for its bargains; instead, according to its website, it “offers curated grocery shopping and food experiences.” But sobering news for Hawaii residents is that the cost of living continues to rise – with few things rising more than groceries, and not just at fancy stores.
The good news: Economists expect prices for volatile things like food and gasoline to level off or decline over time. The bad news: Relatively high inflation is here to stay for a while.
“Food and energy prices are volatile and transitory,” said Sumner La Croix, a professor emeritus of economics at the University of Hawaii Manoa. “So there will be some reversion to the mean” in terms of prices, he said.
At the same time, LaCroix said, the overall prices of goods and services probably won’t stop escalating in the near term.
“I definitely don’t think we’re going to see 2% any time soon,” he said, referring to the inflation rate.
The overall costs of goods and services on Oahu increased 5.4% in November compared with the same month a year ago, according to the U.S. Bureau of Labor Statistics, which tracks monthly prices for Honolulu County.
Meanwhile, grocery prices – called “food at home” by the bureau – rose 6.4% in November. That followed a 9.8% increase in November 2020 compared with November 2019.
The University of Hawaii Economic Research Organization predicts that these rising prices will combine with higher housing costs to make things tough for people in a place where the cost of living was notoriously high even before the pandemic.
“Home prices have surged this year, mirroring a national trend,” UHERO reported in “Recovery Resumes, But Omicron Looms,” its latest statewide forecast. “Together with high rents and higher consumer price inflation, this is posing challenges for families.”
One of the challenges is that wages for some key industries have not kept pace with the rising cost of living. Average hourly wages for restaurant, bar and hotel workers in November were actually lower compared to before the pandemic, according to BLS data published by UHERO. Hourly wages, which topped $18 before the pandemic, were around $16 in November.
But that could change over time, said Peter Ho, Bank of Hawaii’s chairman and chief executive. The pandemic encouraged many baby boomers to retire, Ho said, and that has translated into a generally smaller workforce. As a consequence, Ho said, many firms have had to raise salaries and wages to keep and attract good people. In fact, last week The Wall Street Journal reported that compensation for professionals rose the fastest in 20 years.
Such rising compensation could contribute to some amount of inflation over the long term, Ho said. But he said prices for certain goods and services should come down as supply chain problems get worked out. For example, Ho noted that new car prices have risen largely because of a shortage of semi-conductor chips used in vehicles. Once that shortage is addressed, prices for new cars are likely to level off.
La Croix agreed. The problem is figuring out how long it will take to work out the supply chain problems.
“Trying to forecast that is very difficult,” he said.
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