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Card turnover keeps climbing

Card turnover grew year-on-year in October, as it has in recent months, buoyed by card use abroad, which more than doubled between years, reflecting Icelanders’ renewed appetite for travel. Card turnover data are a reliable indicator of upcoming developments in private consumption, which will presumably continue growing for the remainder of the year.

According to recently published data from the Central Bank (CBI), domestic payment card turnover totalled about ISK 102bn in October, some 31% more than in October 2020 and 16% more than in the same month of 2019. In price- and exchange rate-adjusted terms, however, it was up by 24% YoY. By this measure, individuals’ card use has grown month by month since March of this year.

Card use abroad the main driver of turnover

There is still a vast difference between card turnover in Iceland and card turnover abroad, as has been the case for several months. Foreign turnover has taken over from domestic turnover, which held its ground virtually unabated at the height of the pandemic. This October, domestic turnover grew by 14%, while card use abroad exploded, growing 104% in real terms. A surge of this magnitude is unprecedented, but so are the underlying circumstances, with card use abroad lying virtually dormant for much of 2020.

Concurrent with the publication of data for October, the CBI released updated figures for September, which show that domestic card turnover grew more strongly during the month than was previously reported. It can be said, then, that Icelanders’ consumption is gaining steam every month, particularly to include consumption abroad. This can be seen clearly in figures from the Icelandic Centre for Retail Studies, which show a tenfold jump YoY in turnover in the travel agencies and package tours category – a clear indication that Icelanders are busy dusting off their luggage and their passports at the moment.

Private consumption growth in the offing?

The figures above signal strongly where private consumption is heading, as card turnover is generally a reliable indicator of private consumption growth. In 2020, private consumption contracted by 3% YoY in real terms, whereas in H1/2021 it grew by 5%. It will be interesting to keep abreast developments in Q3, which will be published at the end of November, together with national accounts data for the quarter. Based on card turnover numbers for the past several months, it is logical to expect private consumption to keep growing for the rest of this year.

Other economic indicators point in the same direction. The Gallup Consumer Confidence Index is high, unemployment is on the decline, and real wages have grown markedly this year, inflation notwithstanding. Furthermore, most households’ asset position is sound, and saving increased markedly during the pandemic. In our opinion, this indicates a strong appetite for consumption among the general public, and we are convinced that private consumption still has considerable growth potential after the peak of the pandemic.

Author

Bergthora Baldursdottir

Economist

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