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Year-end surge in card turnover

Icelanders’ payment card turnover continues to grow apace. As in recent months, turnover abroad was the mainstay of growth in December, reflecting Icelanders’ thirst for overseas travel. Card turnover figures and data give promising indications of developments ahead for private consumption, which looks set to grow by leaps and bounds this year.

According to newly published payment card turnover data from the Central Bank (CBI), turnover using domestic cards totalled ISK 111bn in December, some 17% more than in December 2020 and 7% more than in the same month of 2019. In price- and exchange rate-adjusted terms, however, it was up 14% year-on-year. Icelanders certainly picked up the pace in terms of private consumption in 2021, even though the pandemic made its mark on the entire year, as it did in 2020.

There is still an enormous difference between card use within Iceland and card use abroad, as has been the case since April 2021. In December, domestic turnover grew by just under 7% YoY, while card use abroad exploded, growing by almost 84% in real terms. The circumstances are highly unusual, of course, as travel was virtually non-existent for most of 2020. The outlook is for broadly similar growth in the coming term, although the outcome will naturally depend on how the pandemic develops globally.

Icelanders itching to travel

The Icelandic Centre for Retail Studies compiles itemised card turnover data, which show that card use spiked in December, following the usual holiday consumption pattern. Some 62% of all card use in December was due to retail trade, with the other 38% due to services. It can be said that trade increased month-on-month in nearly all categories, given that December is usually households’ biggest spending month of the year. The largest MoM rise was in stores selling books, periodicals, and records/CDs (64.5%), followed by alcoholic beverage stores (63.2%) and clothing stores (53.6%).

It is interesting as well to examine YoY changes in services-related card turnover, as the pandemic arguably invaded people’s private lives more in December 2020 than in the same month of 2021. We can see this, for instance, in card-based spending on travel agencies and package tours, which mushroomed by 285% YoY. The chart below shows how this type of travel-related spending has begun to rise again in the wake of the pandemic.

Other noteworthy items include spending on concerts, theatre, and other events, which rose 123% YoY, while spending on hotel accommodation rose 113%. Clearly, then, Icelanders were ready and willing to go on holiday and attend various types of events this December – far more than in the same month of 2020.

Private consumption far stronger than initially thought

The figures above signal strongly where private consumption is heading, as card turnover is a reliable indicator of private consumption growth. In 2020, private consumption contracted YoY by 3% in real terms, but in 2021 it has developed far more favourably than expected, growing by 5.4% in the first nine months of the year. It will be interesting to see the data for Q4/2021, but given the figures for the past few months, it is quite likely that private consumption growth for the year as a whole will be even stronger.

Other economic indicators point in the same direction. Unemployment has fallen sharply, the Consumer Confidence Index is high, and real wages have grown considerably in the past year, even though inflation has been unusually high. Private consumption is an important factor in Iceland’s GDP growth. In our opinion, Icelanders have a strong appetite for consumption at present, and recent card turnover data support that view. We think it likely that private consumption will keep growing in 2022. Hopefully, the impact of the Corona Crisis on household demand will taper off permanently this year and the growth phase that started last year will continue.


Bergthora Baldursdottir