Households’ payment card turnover continued to grow YoY in December, as it did in every other month of 2024. Turnover with payment cards from domestic issuers totalled ISK 142.1bn in December, a real increase of 3.6% for the month and 4.1% in Q4/2024 as a whole. The fourth quarter was the strongest of the year in terms of domestic card turnover.
Robust real growth in payment card turnover in Q4/2024
Households’ domestic payment card turnover continued to grow in real terms in December. Card turnover was robust throughout 2024, growing year-on-year in each of the four quarters. The overall increase was due largely to card use abroad, as real growth in domestic turnover was on the modest side.
Card turnover abroad has gained steam
Although households’ overall card turnover has grown markedly in real terms, card use in Iceland has increased only moderately. Households’ card use in the domestic market grew in real terms by 1.4% in December and 1.6% in Q4. Turnover abroad grew in real terms by 13.3% in December and 14.1% in Q4, and therefore accounts for the majority of the increase. Icelandic nationals’ departures via Keflavík Airport declined by 0.4% between 2023 and 2024. A large share of the jump in overseas card use is therefore due to online shopping, which gained pace during the year.
Payment card turnover figures can be somewhat volatile and subject to seasonal fluctuations. It is therefore noteworthy how stable the three-month moving average was throughout 2024. The three-month moving average of real growth ranged between 1.4% and 4.1% in 2024 as a whole, whereas it lay in the 2.6-3.8% range if January and December are excluded. This measure of changes in card turnover has been much more volatile in recent years.
Modest private consumption growth in 2024
Although turnover with domestic payment cards was quite robust, private consumption does not appear to have grown particularly strongly in 2024. It rose unexpectedly in Q1, whereas card turnover data had suggested a contraction. Card turnover numbers were revised somewhat later, however, ultimately showing a real increase of 3.5% in Q1. In Q3, private consumption grew in real terms by 0.8% YoY, and real card turnover growth measured 2.6%. According to data from Statistics Iceland (SI), the strongest contributor was Icelanders’ increased consumption abroad. On the other hand, consumer durables purchases contracted, as they did throughout 2024 although this was due largely to a YoY drop in motor vehicle purchases.
Private consumption growth in Q4 will probably turn out relatively modest. According to the Central Bank’s (CBI) most recent forecast, published in Monetary Bulletin 2024/4, private consumption growth is projected at 1% for the year as a whole. In our own macroeconomic forecast, published in September, we assumed that private consumption would grow by 0.8% in 2024. Most indicators suggest that the outcome will be in this range.
Optimism gains ground among households and businesses
In a recent analysis, we noted that new surveys suggested increased optimism among Icelandic households and businesses. In December, the Gallup Consumer Confidence Index hit its highest value in nearly three years, breaking the 100-point barrier for the first time since year-end 2022. Appetite for overseas travel and car purchases has grown, although interest in home purchases has receded slightly. These survey results suggest that private consumption will tick upwards in the near future.
Corporate executives are also more upbeat about the current situation and economic outlook than before. Worker shortages have abated, and the share of firms that consider themselves understaffed was down to 23%, its lowest since mid-2021.
Analyst
