Weekly bulletin 2 September 2024
Inflation decreased unexpectedly between months in August. The economy contracted slightly between months in the second quarter. At the same time, it has become clear that GDP growth was higher in 2023 than previously thought, and that the contraction was less pronounced in the first quarter. This week, the Central Bank of Iceland (CBI) publishes the balance of payment and the minutes of the last meeting of the Monetary Policy Committee (MPC).
2 September 2024
The week ahead
- On Tuesday, the CBI releases data on the balance of payment and net national debt figures.
- On Wednesday, the CBI publishes the minutes of the interest rate decision meeting of the MPC on 21 August.
- On Friday, unemployment statistics will be released in the US.
Image of the week
According to preliminary figures from Statistics Iceland, GDP contracted by 0.3% in the second quarter. Lower private consumption, more import and less export than in the second quarter last year are the key components of the contraction. On the other hand, public consumption and capital formation is up from the same time last year and the weight of inventories was positive. Contraction has now been measured for two consecutive quarters; previously, growth had been continuous since the first quarter of 2021.
Highlights of the previous week
- In its most recent publication of national accounts, Statistics Iceland updated its previous assessment of a 4.1% GDP contraction in the first quarter to 3.5%. All in all, the economy contracted by 1.9% in real terms in the first six months of the year. Statistics Iceland also updated growth figures for 2023, from 4.1% to 5.0%. Activity in the domestic economy is higher than previously thought, despite the current contraction in GDP.
- The CPI rose by 0.09% between months in August, bringing 12-month inflation down from 6.3% to 6.0%. The CPI increased less than we had expected - we forecast unchanged inflation levels. There were an unusual number of surprises in this measurement. The education component fell considerably with the cancellation of tuition fees at some universities. In addition, the price of the food basket decreased for the first time in three years. International air fares decreased as usual in August, yet less than we expected. Summer sales appear to be extending further into fall than normally, with clothing and footwear prices rising less in August than our forecast predicted. We expect 12-month inflation to drop further in the coming months, to 5.9% in September, 5.4% in October and 5.0% in November.
- Statistics Iceland published figures on registered overnight stays in July. Overnight stays by non-Icelandic travellers across all types of registered accommodation types contracted by 6.6% between years in July, with registered stays by foreign tourists at hotels falling by 8.4%. This decrease in overnight stays is rather surprising, as tourist numbers were slightly up between years in July as was non-domestic payment card turnover, by 3.8% at a fixed exchange rate.
- Inflation in the eurozone fell from 2.6% to 2.2% in August, to the lowest it has been for three years. The ECB initiated a rate-cutting cycle this summer with a 0.25 percentage point cut and is likely to continue the trend at its next rate decision date later this month.
- Brim, Hampiðjan, Heimar, Ísfélagið, Íslandshótel, Kaldalón (presentation), Síldarvinnsla, Síminn, Skagi (investors’ presentation) and Sýn (investors’ presentation) published financial statements. JBT announced the extension of its voluntary takeover bid to shareholders in Marel. Arion Bank enlarged its buy-back programme.
- Three bill auctions were held last week by Útgerðarfélag Reykjavíkur, Iceland Seafood and Kaldalón. Reitir auctioned bonds. Government Debt Management announced the results of a tap.
Statistics and market data
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