In a departure from the recent pattern, turnover shrank in both domestic and foreign markets in August. Households’ card turnover in Iceland was down 2.6% YoY in real terms and has now fallen in six of the first eight months of the year. Turnover abroad contracted marginally, by 0.1%, in the first YoY drop since April 2024.

Card turnover balance hits an all-time high

The payment card turnover balance – turnover with foreign cards used in Iceland net of turnover with Icelandic cards used abroad – was positive by over ISK 22bn in August, the largest surplus on record in ISK terms. Card use by foreign tourists in Iceland exceeded Icelanders’ card use overseas, which is typical for the peak tourist season, but the difference in August was larger than has previously been seen. August is usually the largest surplus month of the year, and in August 2025 the card turnover balance was positive by ISK 18.4bn.

Turnover with foreign cards in Iceland increased by 10.3% YoY in August, continuing a pattern of steady growth this year. A total of 314,000 foreign nationals departed from Iceland via Keflavík Airport in August, and while this is a record, the increase between years measured only 0.4%, in spite of the solar eclipse and its expected appeal to tourists.There has been a difference between growth in departure numbers, on the one hand, and card turnover, on the other, showing that each tourist now spends more in Iceland than before. It should be borne in mind, though, that part of the rise in spending is due to price hikes in Iceland rather than to an increase in consumption volume.

Private consumption growth loses pace

According to preliminary figures from Statistics Iceland (SI), private consumption grew by 0.8% in real terms in Q2, down from 1.7% in Q1. In H1 as a whole, it grew by 1.3%, down from 3% a year earlier.

Developments in card turnover suggest that private consumption growth has continued to subside in Q3. Card turnover contracted by an average of 0.8% in July and August, and private consumption could therefore remain flat or shrink slightly in Q3.

Interestingly, the contraction occurred at the same time as household sentiment jumped after several months of widespread pessimism. The Gallup Consumer Confidence Index rose by 18.7 points in August, to 75.7, its highest value since September 2025. This so-called vibecession that has characterised much of this year – in which household sentiment has been bleak while consumption has held its ground – seems to be abating as households pull back on their spending.

The August figures are also the first household consumption metric to be published since the CBI Monetary Policy Committee’s mid-month policy rate hike of 0.25 percentage points, its third of the year. Developments in card turnover suggest that monetary tightening is clamping down ever harder on household demand. On the other hand, inflation measured 5.6% in August, or 5.2% excluding housing. The review of wage agreements. which must conclude by 8 October, is therefore the biggest uncertainty in the outlook for both inflation and private consumption.