The Gallup Consumer Confidence Index (CCI) measured 47.3 points in April, after falling by 9 points between months. It fell been below the 100-point equilibrium threshold in July 2025 and has been declining ever since. The CCI is now at its lowest since October 2020, the peak of the pandemic. Households’ expectations about the economy have crumbled in recent quarters, and far more households are pessimistic than optimistic about economic developments and prospects.
Household expectations at a six-year low
Households’ expectations have grown more muted in recent quarters and are now at their lowest in nearly six years, presumably because of the global situation, plus persistent inflation and high interest rates in Iceland. Households are generally well positioned, however, and private consumption is expected to grow in 2026, albeit at a reduced pace.
Bleak sentiment on the economy
All components of the CCI fell between months and are well below the 100-point threshold indicating parity between upbeat and downbeat sentiment. Expectations have tumbled since last summer and are now at their lowest level in quite some time.
The measurement for expectations over the next six months fell the most and now stands at 44 points, its lowest since 2009. The plunge in the past few months is doubtless driven by heightened uncertainty about the near-term economic outlook, which in turn is most likely due to the Persian Gulf war and its economic repercussions for Iceland. The assessment of the current economic situation fell also, to 52.3 points, its lowest since 2021.
The sub-indices for expectations about the employment situation and current economic conditions have imploded as well. The assessment of the employment situation is now at a post-pandemic low of 59 points, while the assessment of economic developments and prospects is down to just below 23 points, its lowest since the financial crisis in 2009.
Ironically, even though Icelanders’ expectations have plummeted, Gallup’s quarterly big-ticket index of planned major purchases has held its ground. It spiked in Q1/2026, indicating that Icelanders intend to step up car purchases and travel, although the sub-index for planned home purchases is broadly unchanged.
It is worth noting that measurements for the big-ticket index were carried out in Q1, and the war in the Persian Gulf had hardly begun. Even so, it is interesting to see that despite ever-gloomier sentiment about the economy, households still appear to be contemplating major purchases. As the chart shows, this runs counter to the pattern seen in the aftermath of the 2008 financial crisis and at the start of the COVID-19 pandemic, when the big-ticket index and the CCI fell by comparable amounts.
The Persian Gulf war, persistent inflation, and high interest rates
This overarching pessimism is probably due to three factors: the Persian Gulf war, intransigent inflation, and high interest rates. Inflation has been stubborn, even rising since the turn of the year. At the same time, interest rates have been quite high, and in March the policy rate was raised for the first time in three years. The global economic situation has worsened as well, probably contributing to the erosion of sentiment in Iceland. The economic environment is dominated by the Persian Gulf war, which immediately pushed oil prices higher and has already started affecting inflation in Iceland. The interplay among these factors could well have made an impact on household sentiment in the recent past.
In spite of these headwinds, households are generally robust: purchasing power has grown despite persistent inflation, and savings are still sizeable. Most indicators imply that households can afford to make major consumer purchases as well as covering their day-to-day expenses. Private consumption was humming along at a good clip last year, growing in real terms by 4.3%, its fastest since 2022. This year will probably see a slower growth rate, as is suggested by payment card turnover and other indicators. Nevertheless, the overall picture is something of a paradox: household sentiment is at its worst in six years, yet more households look set to make major purchases and private consumption appears likely to keep growing. When all is said and done, the dismal CCI numbers seem to reflect the state of the general economy more than the financial position of Gallup’s survey respondents.
