According to newly published payment card turnover data from the Central Bank (CBI), turnover using domestic cards totalled ISK 82bn in January, some 13% more than in January 2021 and a just over 2% more than in the same month of 2020. In price- and exchange rate-adjusted terms, card turnover grew by just over 10% YoY.
Card turnover above pre-pandemic level
Payment card turnover grew in real terms by over 10% year-on-year in January and is now above the pre-pandemic level. A comparison of last year’s figures with 2019 data shows that growth was strongest in September-December 2021.
The surge between years will come as a surprise to no one, as the dampening effect of the pandemic was strongest in 2020, and only over time did the public learn more or less to live with it. Because 2020 is something of an outlier, it can often be more instructive to compare card turnover figures with those from 2019, before the pandemic struck. As the chart below indicates, over the past few months, turnover has grown markedly relative to 2019. The increase was greatest between September and December, when it measured 9-14%. Comparing January 2022 to January 2020 shows a real increase of 3%, which is nevertheless a smaller rise than in recent months, probably because of the Omicron wave of the pandemic, which was at its most intense this past January. It is safe to say, then, that card turnover recovered in 2021 and is now considerably stronger than before the pandemic.
Card use abroad the main driver of turnover
As in recent months, there was a huge difference between card use within Iceland and card use abroad. In January, domestic turnover grew by just under 2% YoY, while card use abroad surged by 76% in real terms. Of course, the circumstances are highly unusual, given that card turnover abroad came virtually to a halt at the beginning of the pandemic.
If we compare January 2022 and January 2020, however, domestic turnover grew by 5% in real terms, while foreign turnover contracted by 7%. This trend can also be seen in data from the past several months. Even though card turnover abroad is the mainstay of growth at present, it has not returned to its pre-pandemic level. This cannot be said, though, of turnover within Iceland, which is now stronger than before the pandemic.
The outlook is for a broadly similar pattern in coming months, with foreign turnover continuing to drive growth relative to last year. Icelanders’ famed zest for travel has gained steam in the past few months. According to figures from Isavia and the Icelandic Tourist Board, just over 219,000 Icelanders departed via Keflavík Airport in 2021, an increase of 70% YoY. In January 2022, the total was 15,000, a marked decline relative to previous months, albeit an increase of 150% YoY. Presumably, the dip is due to the Omicron variant of the virus, which cut a wide swath through Iceland in January, prompting a tightening of public health measures. By now, however, most countries Icelanders choose to visit have either lifted all pandemic-related restrictions or plan to do so in the weeks to come, so the outlook for overseas travel is brighter.
Private consumption growth in 2021
Private consumption grew strongly in 2021. It grew by 5.4% in the first nine months of the year, and while data for Q4 will not be published until the end of this month, they can be expected to show a similar, if not stronger, growth rate. Payment card turnover figures are a reliable indicator of developments in private consumption; therefore, the outlook is for continued robust private consumption growth further ahead. Other economic indicators point in the same direction: unemployment is down sharply, the Consumer Confidence Index is high, and real wages continue to rise. In our macroeconomic forecast from late January, we project that private consumption will continue to grow steadily in coming years. We forecast private consumption growth at just over 4% in 2022, 3.5% in 2023, and just over 3% in 2024.
