Real household card turnover continued to climb in January and February, and overseas card use remains buoyant. In all, households’ card turnover in Iceland came to ISK 113.6bn in February, an increase of 2.2% year-on-year in real terms. It appears that a robust Q1 is shaping up in terms of payment card use.
Continued real payment card turnover growth in early 2025
Households’ payment card turnover grew in real terms in February, according to newly published figures from the Central Bank (CBI). It has gained ground steadily in the recent term, driven largely by turnover abroad. Even though real card turnover is on the rise, real growth in private consumption was below forecasts in 2024.
Card turnover growth in the home market loses considerable steam, but the overseas surge goes on
Households’ card turnover within Iceland totalled ISK 85.3bn in February, growing by only 0.1% YoY in real terms. It was the slowest month for real turnover growth since September 2024, and well below the January figure of 3.4%. Turnover abroad was far stronger, however, as it has been in the recent term, growing by 13.1% in January and 9.7% in February. Presumably, the surge is due to brisk e-commerce among Icelanders who shop with foreign online merchants, and to Icelanders’ overseas travel during the winter. According to a recent press release from the Icelandic Tourist Board, Icelanders’ departures via Keflavík Airport increased by more than 17% YoY in the first two months of 2025.
The contributions from card turnover at home versus turnover abroad have remained broadly stable recently, with the contribution from turnover within Iceland ranging between 75.9% and 81.5% in the past two years. In February, card use in Iceland accounted for 76.2% of total turnover and card use abroad 23.8%. The contribution from domestic turnover is therefore close to its lower bound at present.
Consumer durables purchases on the back burner
According to the most recent data from Statistics Iceland (SI), private consumption growth measured 0.5% in 2024, well below the 0.9% we projected in our macroeconomic forecast from January. Consumer durables purchases therefore appear to have slowed, and new motor vehicle registrations contracted sharply during the year. We expect them to pick up as inflation and interest rates fall, and the first months of 2025 show a shift in this direction. New car registrations were up 46.5% YoY in January and February, according to new data from Bílgreinasambandið, the Icelandic association of motor vehicle sales and service entities.
At the moment, a number of indicators imply that private consumption will grow more quickly in the coming term. Since mid-2024, household pessimism about the economic and employment outlook has plummeted and optimism has grown. For instance, the Gallup Consumer Confidence Index has measured above 100 points for the past four months. Households’ saving rate is still very high, and with rising property prices, their net wealth has grown to perhaps its highest level to date. Their equity and their debt position are therefore sound in historical terms.
Households’ recent accumulation of sizeable savings plus growth in disposable income will probably boost private consumption in the period ahead. Furthermore, the durables purchases that were put on hold when interest rates were at their recent peak will probably resume during the forecast horizon. Thus the outlook is for considerably stronger private consumption growth in 2025 than in 2024. In our macroeconomic forecast from January, we projected year-2025 private consumption growth at 2.7%, but developments since then suggest that uncertainty about that forecast is tilted to the upside.
