Financial and Mortgage Portfolio Overview
Inflation erodes household purchasing power
Private consumption growth will be weaker in the near term as a result
Highlights
Private consumption rallied last
year, growing by 7.6% YoY, after
contracting by 3% in 2020
In real terms, private consumption
was 4.4% more in 2021 than in
2019, indicating that Icelanders
Private consumption and related indicators
% change year-on-year (left) and index value (right)
15
have more than recovered their pre-
pandemic consumption level
10
Private consumption is estimated to
have increased by 8.8% YoY in
1Q2022, largely due to increase in
5
travel and direct purchases abroad
by resident households
0
Relevant indicators, such as card
turnover and real wage growth
suggest a relatively strong 2Q2022
-5
As the year advances, private
consumption growth will probably
lose momentum due to declining
optimism among households and
both inflation and higher rates
eroding their purchasing power
Real wage growth is likely to be
-10
-15
halted by an inflation spike in 2022,
to return slowly in coming years
Households are well positioned and
have accumulated significant
savings which will probably help
sustain private consumption growth
for the rest of the year
Private consumption growth is
forecast at 3.8% in 2022, 2.2% in
2023 and 4.2% in 2024
160
140
120
3.8
4.2
2.2
20
0
-20
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
2017 2018 2019
2020 2021
2022
2023 2024
Private consumption
Household card turnover
Real wages
- Gallup CC index (r.axis)
100
80
60
40
20
20
Sources: Central Bank of Iceland, Gallup, Statistics Iceland, ÍSB Research.
44
August-September 2022View entire presentation