Rising housing and gasoline costs helped push consumer prices in Honolulu up 3.1 percent in the first six months of this year compared with a year earlier.

The rise in prices is partly a byproduct of Hawai'i's strong economy, which is benefiting from robust real estate and construction and record tourism. That means job stability and new jobs, but also an increase in the cost of living.

Inflation "is in everything. It's everywhere," said Joe Green, owner of Surf N Sea in Hale'iwa.

"For all of us that are living here and are trying to raise a family and have children — unless they get a good paying job, they're not going to be able to find a place (to live) at all. It's shocking. It really is."

While high compared with most of the past decade, Honolulu's rate of inflation so far this year is slightly lower than the same period last year. In the first six months of last year inflation was 3.3 percent — its highest rate since 1992. Nationwide, consumer prices rose by 3 percent.

State economist Pearl Imada Iboshi noted that the cost of living in Honolulu "continues to increase, but not at an accelerating rate."

Honolulu housing costs rose 4 percent during the first six months of this year, which was below last year's 4.6 percent rise, according to figures released yesterday by the U.S. Department of Labor. But gasoline prices increased 13.9 percent, versus 13.8 percent during the first six months of last year.

For Hawai'i residents, higher costs appear to be offset by higher income. During the first three months of the year incomes rose 6.9 percent, according to figures released by the U.S. Bureau of Economic Analysis. After backing out inflation, incomes on average rose 3.8 percent in the first quarter — a high level economists said is unlikely to be sustained throughout 2005.

Higher inflation hits the pocketbooks of residents and the budgets of businesses, which face higher rent, pressure to raise wages, and rising insurance and other costs.

Surf N Sea's Green said his biggest concerns are rising liability, workers' compensation and health insurance. The increased costs ultimately get passed on to consumers, he said.

"It's all in the mix somehow or another," Green said.

According to economists, inflation pressures won't disappear anytime soon. If anything, inflation is still more likely to creep upward than fall as high housing and energy costs filter through the economy, said Byron Gangnes, a University of Hawai'i associate professor of economics.

"It's too soon to say that inflation has stabilized," he said. "There's going to be some upside risk in terms of rental costs because of the increases in housing costs.

"The real surprise is that we're not seeing the effect of the pass-through of housing prices" on rents.

Leroy Laney, professor of economics and finance at Hawai'i Pacific University, agreed that inflation may continue to rise.

"We should expect higher inflation eventually — it's in the pipeline," he said. "It would be wrong to say that this is the end of it."

Reach Sean Hao at shao@honoluluadvertiser.com.