We forecast a 0.2% decline in the CPI in July

We project that the consumer price index (CPI) will fall 0.2% month-on-month in July, and that twelve-month inflation will fall correspondingly, from 3.3% in June to 3.1% in July.


We project that the consumer price index (CPI) will fall 0.2% month-on-month in July, and that twelve-month inflation will fall correspondingly, from 3.3% in June to 3.1% in July. The outlook is for inflation to ease somewhat in coming quarters, owing to a slowdown in house price inflation and a more favourable outlook for wage developments. We expect it to measure 2.7% at year-end 2019 and 2.8% at the end of 2020 and 2021. Statistics Iceland (SI) will publish the July CPI at 9:00 hrs. on 22 July.

Summer sales the main driver of disinflation

Seasonal sales are in full swing at the moment and have a strong downward impact the CPI in July. The most prominent single downward-pushing item is clothing and footwear prices, which we project to fall 11% MoM (-0.5% CPI effect), about the same as during the past few summers. In addition, we expect furniture and housewares prices to fall by about 2% (-0.01%), and we expect petrol prices to fall as well between months, lowering the CPI by another 0.01%.

Inflation forecast 2019

Author


Bergthora Baldursdottir


Analyst

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