The analysis department of Arion Bank states that there is increasing evidence that the economic recovery in Iceland is slowing down. Decreasing private consumption is a sign of a downturn in the economic growth.

Photo: Páll Kjartansson/Iceland Review.

The department’s latest Markaðspunktar newsletter states that a setback in private consumption does not come as a surprise, visir.is reports.

It had always been clear that while the impact of specialized measures for homeowners faded out, the growth in consumption would slow down, the report reason. The measures include premature payments from people’s individual pension savings.

It is stated that these actions would only have had a long-term effect if followed by increased investment which would have created employment, increased production and purchasing power and thus encouraged continued growth in domestic demand.

Markaðspunktar concludes that this appears not to be happening as there are no indications of significant changes to investments in Q4 in 2012. Continued decline of investments is predicted, which is already at an historic low.

Click here to read about the BBC’s recent coverage of Iceland’s ‘economic recovery.’

ESA