Weekly Bulletin 21 October 2024
Last week, we published an economic forecast to the year 2027. The housing price and rental price indexes decreased more between months in September and household payment card turnover contracted between years domestically while rising abroad. The Central Bank of Iceland (CBI) published the minutes of the Monetary Policy Committee (MPC) meeting, which shows that all Committee members agreed to lower the policy rate. Several companies publish financial results this week.
21 October 2024
The week ahead
- Sjóvá publishes results today.
- On Tuesday, Icelandair and VÍS publish results.
- On Wednesday, Íslandsbanki and Landsbankinn publish results.
- On Thursday, Play publishes results.
Image of the week
We forecast a near standstill in the economy between years this year. A setback in export sectors affected the first half of the year, with a capelin catch failure and slower growth in the travel sector causing a contraction alongside the cooling impact of high interest rates on demand, which nevertheless remains fairly robust. The economy then gets off to a nice and easy start with 2% annual growth in the coming years. We expect a mostly steady decrease in inflation to the forecast horizon, despite the possibility of individual setbacks. Earlier this month, the MPC of the CBI initiated rate cuts and we expect to see further, gradual cuts alongside receding inflation.
Highlights of the previous week
- According to the minutes of the MPC meeting, all Committee members voted for the Governor’s proposal to lower the CBI’s key interest rate by 0.25 percentage points, although one Committee member would have preferred to hold the rate unchanged. This was a more harmonious decision than we had expected.
- HMS published the housing price index, the rental price index and its monthly report. The housing price index decreased between months for the first time since January, by 0.28%. The price of single-family dwellings in the capital region fell most, by 1.72%, while single-family dwellings in rural Iceland rose by 2.45%. The 12-month increase of the index fell from 10.8% to 9.5%. The rental price index is also down between months, by 0.6%. Despite a lower increase in the rental price index than the housing price index, the 12-month increase in rental price outstrips that of housing prices and is 10.5%.
- Total payment card turnover by Icelandic households was ISK 120.8 bn in September and is up by 1.2% between years, having regard for price and exchange rate changes. Domestic payment card turnover by Icelandic households contracted by 1.8% in real terms and increased by 12.4% overseas at a fixed exchange rate, compared to September 2023. While Icelandic payment card turnover overseas remains strong, it finally appears to be slowing down domestically. Domestic payment card turnover contracted for the first time since March and total payment card turnover increased rather less than in the most recent months.
- A bill providing for a kilometre fee for vehicle use was posted to the official government portal. We await further information from Statistics Iceland on if and how the changed fee taking will affect the CPI.
- The Confederation of Icelandic Employers published the results of a new Gallup survey of the 400 largest companies in Iceland.
- The ECB lowered its policy rate by 0.25 percentage points. This was generally in line with expectations, as inflation in the eurozone recently dipped below the ECB’s 2% inflation target, and most indicators have shown cooling. The ECB initiated the rate-cutting cycle in June and this is the third cut over a span of four meetings.
- Inflation in the UK measured 1.7% in September and is now below the UK inflation target.
- Hagar published results (investor presentation). Play announced its intention to adjust its business model and apply for an air operating license in Malta.
- Government Debt Management auctioned treasury bills and treasury notes. Síminn auctioned bills.
Statistics and market data
Weekly bulletin 21 Oktober 2024 (PDF in Icelandic)
Disclaimer
This review and/or summary is marketing material intended for information purposes and not for business purposes. This marketing material does not contain investment advice or independent investment analysis. The legal provisions that apply to financial advice and financial analysis do not apply to this content, including the ban on transactions prior to publication.Information about the prices of domestic shares, bonds and/or indices is source from Nasdaq Iceland - the Stock Exchange. Landsbankinn’s website contains further information under each individual equity, bond class or index. Information about the prices of non-domestic financial instruments, indices and/or funds are sourced from parties Landsbankinn considers reliable. Past returns are not an indication of future returns.
Information about the past returns of Landsbréf funds is based on information from Landsbréf. Detailed information about the historic performance of individual funds is available on Landsbankinn’s website, including on returns for the past 5 years. Information about the past performance of funds show nominal returns, unless otherwise stated. If results are based on foreign currencies, returns may increase or decrease as a result of currency fluctuations. Past returns are not necessarily an indication of future returns.
Securities transactions involve risk and readers are encouraged to familiarise themselves with the Risk Description for Trading in Financial Instruments and Landsbankinn’s Conflict of Interest Policy, available on Landsbankinn’s website.
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