The Gallup Consumer Confidence Index (CCI) measured 49.2 points in June, after falling by 5.2 points between months. Expectations are therefore stubbornly bleak, running neck-and-neck with the pandemic-era low, as they were this April. Furthermore, the CCI has been below the 100-point equilibrium level for a full year, showing that pessimism about economic developments and prospects has outweighed optimism for the entire time.
Sentiment hits bottom, but big-ticket purchase plans are firming up
The Gallup Consumer Confidence Index is still very weak and has measured below its 100-point threshold for twelve months running. Yet in spite of this widespread downbeat sentiment, the big-ticket index has risen in the last two quarters, indicating that household are still ready to undertake major purchases.
Expectations about the economy distinctly bleak
All components of the CCI fell between months and are well below 100 points. Household expectations have tumbled since last summer.
The subindex measuring economic expectations six months ahead fell the most between months. It plunged to its lowest level since 2009 in April and then recovered slightly in May, only to slide again in June. These fluctuations probably reflect heightened uncertainty about the economic outlook in Iceland and abroad. The assessment of the current economic situation measures 49.2 points, its lowest since March 2021, and sentiment about employment stands at 52 points, its lowest since 2020.
This trend accords with developments in the labour market, where unemployment has picked up in the recent term.
The subindex measuring current economic developments and prospects is the lowest of all, at 32.5 points, indicating that pessimists outnumber optimists by more than two to one.
Major purchases despite downbeat sentiment
Even though households’ expectations have sagged, the Gallup big-ticket index has held its own, even rising in the past two quarters. This indicates that more Icelanders are considering major purchases such as homes and cars, although fewer are planning to travel in the near future.
The biggest difference is in planned home purchases. In all, 6.8% of respondents consider themselves very likely or somewhat likely to buy a home in the next six months. With the exception of Q3/2024, this the largest share reporting house purchase plans since 2019, even though housing market demand was very strong in 2020-2024. The biggest increase between measurements is in East Iceland.
Expectations vis-à-vis car purchases have likewise increased, and now 16% of Icelanders consider themselves very likely or somewhat likely to buy a car in the next six months. The rise in car purchase plans between surveys has been particularly striking on the Suðurnes peninsula, with the subindex shooting up from 38.7 to 86.5 points.
On the other hand, the subindex for planned overseas travel has fallen. The share of respondents who consider it very likely that they will travel abroad in the next twelve months has fallen, both between quarters and between years. Now roughly 51% report that they will probably travel abroad in the coming year, down from 58% twelve months ago.
It is interesting to see that despite ever-gloomier sentiment about the economy, households still appear to be contemplating major purchases. The big-ticket index has risen two quarters in a row, while the CCI is at its lowest since the pandemic. 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.
What does this say about private consumption?
Household expectations have dimmed considerably in recent quarters, owing not least to inflation, which has proven difficult to dislodge and even rose again early in 2026. In tandem with this, interest rates have remained high, and the Central Bank (CBI) has raised its policy rate twice in 2026 to date – in March and in May – its first rate hikes in three years.
The global economic environment has clouded over as well in recent months, and greater uncertainty abroad probably affects household sentiment in Iceland as well. The combination of persistent inflation, high interest rates, and elevated global uncertainty appears to have had a strong impact on Icelanders’ expectations.
Nonetheless, this bleak sentiment appears to be a barometer of households’ assessment of the economy as a whole rather than of their own financial position. Although a low CCI value generally indicates that private consumption will lose steam in the coming term, households still appear ready to take on major purchases, according to Gallup’s most recent measurements.
This is due in part to their continued strong position. The household saving rate is still historically high, and real wages have kept growing, rising by 3.7% in 2025. The outlook is for real wage growth to continue, although at a reduced pace, and this should help support private consumption in the period ahead.
Nevertheless, our most recent macroeconomic forecast assumes that private consumption growth will be more modest in 2026 than in 2025, mainly because of a cooler economy and still-high interest rates. Further ahead, we expect private consumption growth to pick up again gradually, as the economy gains momentum.
