As has been the case for most of this year, overseas card use was the mainstay of turnover, while card use in Iceland subsided. In real terms, households’ card turnover within Iceland shrank 1.7% YoY September and has now fallen in seven of the first nine months of the year. On average, it has contracted by 1.6% thus far in 2026, whereas it grew by 1.8% over the same period in 2025. Only twice since 2011 has it contracted more in the first nine months of the year: in 2013 and 2023.

Household sentiment at a low ebb 

In tandem with the contraction in card turnover in the home market, the Consumer Confidence Index (CCI) took a nosedive in September, plunging to 51.5 points, a 24-point drop. This brings consumer expectations more or less back to where they were before August, when the CCI leapt unexpectedly by nearly 19 points. Presumably, then, the August measurement was an outlier rather than a sign of a turnaround in household sentiment, and it appears that households remain quite pessimistic about economic developments and prospects.

Despite this recent pessimism, the Gallup big-ticket index has held its own. The index, which captures consumers’ planned major consumption expenditures, measures 67.2 points, down only 0.2 points from the previous measurement and still above its ten-year average. This indicates that consumers’ overall attitude towards the economy has suffered more than their major purchase plans have. Fewer households are planning to buy a home or a car in the months ahead, but house purchase plans measured unusually high in the last survey (taken in June) and are now roughly back to the levels seen in previous quarters. 

Icelanders’ travel plans have perked up, however. Nearly 55% of respondents consider it highly likely that they will travel abroad in the next twelve months, up from 51% in Q2 and 50% in Q3/2025. As these numbers show, travel is still firmly on Icelanders’ docket, even though they have taken fewer trips overseas thus far in 2026. In the first nine months of the year, Icelanders’ overseas trips were down 9.4% YoY. 

This aligns well with developments in payment card turnover abroad, which has been growing more slowly in recent months. It grew by 5.2% YoY in real terms in September, but by only 3.2% in Q3 as a whole, its slowest quarterly increase since Q2/2024.

 That said, card turnover abroad reflects shopping with foreign online merchants as well as spending while travelling overseas. Foreign e-commerce totalled just under ISK 3bn in August, according to data from the Centre for Retail Studies (RSV), and has been on the rise, even though it still accounts for only 9% of Icelanders’ overseas card use.

Subdued private consumption growth ahead 

Private consumption picked up in 2025, growing by 3.6% in spite of a widening labour market slack and a cooling economy. Growth has subsided markedly in 2026 to date, however, and more rapidly than we had anticipated. In H1, private consumption increased by only 1.3% YoY, and both card turnover figures and household expectations suggest that growth eased in Q3. That said, the Gallup big-ticket index suggests that consumers still have a little wind in their spending sails, although they are clearly more cautious than before. 

Households appear to have grown more guarded overall about consumption spending, owing to persistent inflation, high interest rates, and heightened uncertainty about the economy and labour market. This can be seen clearly in this year’s sluggish growth in private consumption. Even though households are clutching their wallets more tightly, they are well positioned overall, with modest debt and historically low arrears. They still hold sizeable savings from the pandemic era, although they have drawn down their balances since then. Purchasing power has held up over the period and looks set to keep growing during the forecast horizon. These factors should support private consumption in the coming term despite the increased slack in the economy. 

In our most recent macroeconomic forecast, we have revised our private consumption growth projections downwards for 2026 and 2027, mainly because we expect both the chill in the economy and the slack in the labour market to last longer than previously assumed. We do expect private consumption to keep growing in coming years, but at a reduced pace. As inflation, interest rates, and unemployment ease and economic activity regains steam, we expect private consumption growth to pick up speed gradually. Because GDP growth is largely consumption-driven, a slower increase in private consumption is one of the main reasons we project GDP growth to be weaker in the first half of the forecast horizon than we had previously assumed.