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Card turnover abroad takes flight

Payment card turnover abroad continues to be the mainstay of growth in total card turnover among Icelanders. In September, card turnover within Iceland contracted by 3% year-on-year in real terms, while turnover abroad jumped 80%. Based on card turnover figures and other indicators, private consumption will clearly keep growing strongly for the remainder of the year.

According to recent payment card turnover data from the Central Bank, turnover using domestic cards grew 7% YoY in September. In price- and exchange rate-adjusted terms, however, it was up by just under 6% YoY. Since March of this year, individuals’ card turnover has increased each month in real terms, and we expect the trend to continue in the months to come.

But there has been a vast difference between card turnover in Iceland and card turnover abroad in the recent term. During the pandemic, turnover within Iceland more or less held its ground, while turnover abroad all but collapsed, as could be expected. In recent months, however, card turnover abroad has rebounded, and most of the increase in card use has been due to turnover abroad. In September, for instance, card turnover within Iceland contracted by 3% year-on-year in real terms, while card turnover abroad rose by more than 80%, also in real terms.

All this said, we are not deeply concerned about domestic card turnover, despite the YoY contraction in September. It is often more instructive to examine quarterly data, as individual months can give a skewed picture of actual developments, not least during a crisis like the COVID-19 pandemic. In Q3/2021, total card turnover was up 8% relative to the same quarter in 2020. Icelanders’ card turnover abroad was up more than 70% YoY in Q3/2021, whereas card turnover within Iceland increased by 0.6% over the same period.

All of these numbers tell the same story: card turnover at home is treading water, but card turnover abroad is on the rampage. It appears that Icelanders are travelling overseas again, and in considerable numbers. For example, Icelanders’ departures from Keflavík Airport were nearly six times as many in September 2021 as in the same month of 2020. We assume that this trend will continue in coming months, as the so-called COVID effect subsides.

Private consumption growth ahead

Payment card turnover is a reliable indicator of private consumption growth in Iceland. In 2020, private consumption contracted by 3%, as domestic consumption patterns remained relatively stable, while consumption abroad was upended. Private consumption is an important factor in Iceland’s GDP growth, accounting for about half of GDP in recent years. It was inevitably battered by the pandemic, but apparently, better times are ahead.

Private consumption grew 4.7% YoY in H1/2021. Indicators imply that it will continue to grow strongly for the remainder of the year. The Gallup Consumer Confidence Index is at its highest in five years, unemployment is on the decline, and real wages have grown markedly this year, in spite of persistent inflation. Furthermore, most households’ asset position is sound, as saving increased markedly during the pandemic. Because of this, we think the appetite for consumption is strong among the general public, and private consumption still has considerable growth potential after the pandemic.

In our recent macroeconomic forecast, we projected private consumption growth at just under 5% this year, 3.6% in 2022, and 3.0% in 2023. Based on the newest card turnover figures and other indicators, we believe our forecast for 2021 to be very close to accurate.


Bergthora Baldursdottir