In the past year, house prices nationwide have risen by nearly 16%, according to SI figures, with single-family homes in greater Reykjavík up 18%, housing in regional Iceland up 16.5%, and capital area condominium prices up nearly 15% since the beginning of 2021.
Dairy product prices and airfares rise, petrol and housewares prices fall
Chief among the other CPI items that pushed the index upwards in December were the following:
- Food and beverage prices rose by 0.7% (0.11% CPI effect). This is due largely to a 3.3% increase in dairy products (0.09% CPI effect), as the agricultural pricing committee recently announced a commensurate rise in wholesale prices, which appears to have been passed through directly to retail prices.
- Air transport prices rose by 10.3% (0.15% CPI effect). International airfares usually rise before the holidays, and this year was no exception. It has been difficult to detect a pattern in airfares recently, as the airline industry was in a pandemic-induced state of disarray from early 2020 until this summer, and again this autumn.
- The item Other goods and services rose by 0.8% (0.06%), owing mainly to hikes in the price of cosmetics and insurance and financial services.
On the other hand, items pulling the CPI downwards included the following:
- Furniture and housewares fell in price by 1.3% (-0.09%).
- Petrol prices fell 1.0% (-0.03% CPI effect). This is in line with the steep drop in global prices following the late October peak.
Inflation is widespread
As the chart indicates, the housing component is a major player in inflation numbers at present. Of December’s 5.1% headline rate, which is also the rise in prices over the year 2021, just under 2.3% is due to housing, while 1.2% stems from domestic services, just under 0.7% from domestic goods, and just under 1% from imported goods. But it cannot be said that the housing component alone explains the deviation of inflation from target, as inflation excluding housing measures 3.3%, as is mentioned above. Factors such as domestic costs – wage costs in particular – rising imported input prices, and surging international shipping costs play an important role as well.