According to newly published figures from the Central Bank (CBI), Icelanders used their payment cards to the tune of just over ISK 152bn in July, a 5.6% year-on-year increase in nominal terms but only 0.4% in real (price- and exchange rate-adjusted) terms. Real growth in card turnover has slowed down in the past few months, until June, suggesting that households’ appetite for spending is waning after the boom of recent years.
Private consumption shows signs of slowing
Real payment card turnover grew incrementally between years in July. However, it has been losing pace in the recent term, suggesting that private consumption is likewise softening. This weakening trend is consistent with indicators of a growing slack in the economy.
As in the recent past, consumption in the home market and consumption abroad followed two very different patterns. Households’ real card turnover abroad grew by 4.4% YoY in July, while turnover at home shrank by 0.9%.
Overseas consumption still the main driver of card turnover
Icelanders’ trips abroad increased YoY in July, for the first time this year, which lines up well with payment card turnover figures. According to the Icelandic Tourist Board, nearly 68,000 Icelanders departed from Keflavík Airport during the month, roughly 2% more than in July 2025. Although departure numbers were down in the first half of the year, real card turnover abroad has increased each month in 2026. Growth in card use has lost momentum in recent months, however, and is now considerably below peak levels.
Card turnover balance positive during the peak tourist season
The card turnover balance showed a surplus in June and July 2026, after a consistent deficit stretching back to last autumn. The surplus measured ISK 2.6bn in June and grew to ISK 13.6bn in July. As is typical over the summer, foreign tourists’ card use in Iceland exceeded Icelanders’ card use abroad.
Weaker private consumption growth in the offing?
According to preliminary figures from Statistics Iceland (SI), private consumption grew by 2.2% in real terms in Q1/2026. Figures for Q2 will be available at the end of this month. Developments in card turnover suggest that private consumption growth was negligible or even flat in Q2 and will continue in the same vein in Q3. If so, this would be a major change from 2025, when private consumption was a key driver of GDP growth. Most indicators now imply that economic activity has lost pace. Households’ position remains solid, however; purchasing power has held its ground and saving is still relatively strong. This supports our opinion that private consumption will continue to grow this year but will probably fall short of the 4.3% YoY growth rate seen in 2025.
The CBI’s Monetary Policy Committee (MPC) is meeting today and probably has these figures in hand as it deliberates on the policy interest rate decision to be announced tomorrow morning. In May, the bank projected year-2026 private consumption growth at 2%, and developments since then will probably support the case for a more accommodative stance rather than the reverse. Private consumption is unlikely to be a determining factor in this month’s policy rate decision, though. As we noted in our interest rate forecast, we expect persistent inflation and excessively high inflation expectations to carry more weight in the decision than the obvious signs of a growing slack in the economy. We therefore project that the MPC will raise the policy rate by 0.25 percentage points.
