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Card turnover keeps contracting

Real payment card turnover contracted year-on-year in November, the eighth consecutive monthly decline. Presumably, it would have shrunk still further had it not been for the special sale days that have grown more and more popular each year. Most indicators imply that private consumption growth will be weaker than previously forecast.

Turnover with domestic payment cards increased in November by 4% year-on-year in nominal terms, to just over ISK 117bn. In price- and exchange rate-adjusted terms, households’ card turnover contracted by 2.5% YoY in November. It was the eighth consecutive decline in real terms, albeit smaller than in October. One cause of this could be that Icelanders’ consumption patterns have changed in response to big sale events such as Singles’ Day and Black Friday.

Both in Iceland and abroad, card turnover shrank in real terms in November, continuing the recent pattern. Card use within Iceland was down nearly 2% YoY, while turnover abroad contracted by around 5% over the same period. Despite the contraction in card turnover overseas, Icelanders did their fair share of travelling in November, as we have reported recently. Some 43,000 Icelandic nationals departed the country via Keflavík Airport in November, an increase of 26% YoY. This is a noticeable shift from the months beforehand, when Icelanders’ departures for points abroad declined. It will be interesting to see how Icelandic nationals’ travel behaviour develops in coming months, as consumption abroad is on the wane despite the YoY uptick in overseas travel in November.

Foreign payment card use in Iceland totalled ISK 17.5bn in November, whereas domestic payment card use abroad came to slightly more than ISK 24bn. This pushes the payment card turnover balance into negative territory in November, for the first time since May. Foreign currency outflows arising from these card transactions presumably totalled just over ISK 6bn during the month. The negative card turnover balance for November probably stems mainly from the rebound in Icelanders’ overseas travel concurrent with the dip in tourist visits to Iceland due uncertainty related to the seismic activity on Reykjanes peninsula.

November: once again, the standard-setter for the year’s e-commerce

Data from the Icelandic Centre for Retail Studies show clearly how strong November was for e-commerce. Close to 17% of all payment card turnover was due to net-based sales during the month – well above the average of 13% for other months in 2023. The surge is due mainly to the widespread adoption of sales and special offers originating in the US – Black Friday and Singles’ Day, for example – which constitute a growing share of Icelanders’ consumption spending in November.

These special offers are not restricted to online shopping, however, as physical stores participate as well. The smaller YoY contraction in card turnover in November relative to October could well be an indication that consumers have begun to take advantage of these special sales in greater measure, not least in a bid to finish their holiday shopping earlier. If so, consumption will probably be accordingly weaker in December.

Will private consumption contract in Q4/2023?

Private consumption has slowed markedly in 2023. In H1, it grew by 2.5%, and in Q3 it contracted for the first time since 2020. The reversal in private consumption has been a sharp one, and it is clear that high interest rates and inflation have begun to make a major dent in Icelanders’ consumption spending. Various indicators imply that Q4 will see a contraction as well. A key signal is the contraction in card turnover in October and November, supplemented by the Gallup Consumer Confidence Index, which is now at its lowest since early in the pandemic.

Private consumption growth for the first three quarters of 2023 measured 1.3%. In our macroeconomic forecast from this autumn, we projected it at 1.9% for the year as a whole. Given the Q3 private consumption figures and other indicators for October and November, it is quite likely that the actual growth rate will be even slower than we had forecast this autumn. Private consumption has been one of the main drivers of GDP growth in the recent term, and it is clear that this part of the economy is cooling rapidly. As we see it, the Central Bank’s (CBI) interest rates are delivering significant results in discouraging consumption and incentivising saving. All else being equal, we assume that the CBI’s monetary tightening phase is now coming to a close, if it has not already ended.


Bergthora Baldursdottir