26 August 2024
The week ahead
- Tomorrow, Síminn publishes financial results.
- On Wednesday, Heimar, Sýn and Skagi publish results.
- On Thursday, Statistics Iceland publishes inflation figures for August. We expect unchanged inflation at 6.3%. Brim, Hampiðjan, Íslandshótel, Kaldalón and Síldarvinnsla publish results.
- On Friday, Statistics Iceland publishes the national accounts, Eurostat releases inflation figures for the eurozone and Ísfélagið publishes results.
Image of the week
Housing prices rose significantly more than rental prices during the pandemic, reflecting the slow-down in immigration to Iceland and contraction in demand for rental housing. At the same time, demand for residential property for purchase increased dramatically in a low interest-rate environment. Rental prices have since risen and are currently rising faster than housing prices. Immigration grew considerably again in the post-pandemic era and high interest rate levels compound the difficulty of entering the housing market.
Highlights of the previous week
- The Monetary Policy Committee (MPC) of the Central Bank of Iceland (CBI) decided to maintain unchanged policy rates last week. The CBI’s key interest rate has now been 9.25% for over a year. We consider the tone of the MPC’s statement to be rather harsher than in May. The MPC now states that it may “take some time” to achieve acceptable reduction in inflation, which was not expressed in the previous statement. As with the previous decision, the statement contends that the MPC considers the current level of restraint adequate and goes on to add that persistent inflation and robust domestic demand calls for caution. We consider this an indication that initial rate cuts may be delayed even longer, even into the new year. This and other topics were up for discussion in Economic Research’s new podcast on Umræðan.
- Alongside the interest rate decision, the CBI published the August edition of its Monetary Bulletin containing updated macroeconomic and inflation forecasts. The CBI now expects higher inflation than in its previous forecast, extending into the middle of 2025. The CBI downgraded its economic growth forecast for the year, primarily to reflect the poorer outlook in the travel sector.
- The goods and services balance was negative by ISK 22.3 bn in the second quarter of this year, a much worse result than the same time last year when it was positive by ISK 6.4 bn. As is usual in the second quarter, there was a surplus on services and a deficit on goods. Export and import of goods, and import of services increased between years while the export of services contracted. This is due mainly to worse results in the travel sector during the second quarter of this year as compared to the same period last year.
- The Housing and Construction Authority (HMS) published the housing price index, the rental price index and its monthly housing market report. The housing market is fairly lively, with the housing price index rising by 0.8% between months in July, bringing the 12-month change from 9.1% to 11.0%. The rental price index rose rather more, or by 0.2% between months, bringing the 12-month increase to 15.1%.
- Statistics Iceland published the July wage index and figures on available employment in the second quarter. The wage index rose by 0.2% between months and the 12-month increase is 6.3%, the same as the 12-month increase of the CPI. The purchasing power of wages is thus the same as in July 2023. The number of available jobs in the second quarter indicates that labour market slack is increasing, with the number of available jobs growing both between years and quarters.
- Eimskip, Iceland Seafood, Nova and Reitir published results.
- Landsbankinn issued covered bonds and offered switches, Government Debt Management auctioned Treasury bills and Treasury notes and Municipality Credit Iceland released an updated issue forecast.
Statistics and market data
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.
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