Inflation Rate in Iceland Decreases to Two-Year Low

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Inflation in Iceland slightly decreased to 6.6%, the lowest rate since February 2022, although it is still significantly higher than the target set by the Central Bank. The decrease fell short of analysts’ expectations, with the winding down of winter sales impacting prices of clothing, shoes, and furniture.

Four percentage points over the target

Inflation slightly decreased month-over-month and is currently being measured at 6.6%, RÚV reports. This marks the lowest inflation rate recorded in Iceland since February 2022 despite remaining over four percentage points above the Central Bank’s inflation target.

As noted by RÚV, the current measurement represents the third consecutive decrease in inflation, although the reduction was less than what bank analysis departments had predicted; Íslandsbanki and Landsbankinn had forecasted inflation to be at 6.1%, half a percentage point lower than the actual level of inflation.

Winter sales coming to an end have contributed to inflationary pressures. Prices for clothing and shoes increased by 8.4%, and furniture prices by 5.5%. Excluding housing prices, inflation would stand at 4.7%.

According to the harmonised index of consumer prices for the European Economic Area published by Statistics Iceland on Monday, inflation has risen by 5.6% over one year domestically, with only Serbia, Romania, and Turkey – where inflations stand at 64.9% – recording higher rates.

The average inflation rate across the EEA is 3.1%, with the lowest rates observed in Denmark and Italy at 0.9%.

Inflation refers to the rate at which the general level of prices for goods and services is rising and, subsequently, purchasing power is falling.

Icelandic Film Industry Sees 80% Growth in Ten Years

Katla Netflix/Lilja Jónsdóttir

The operating revenue of the Icelandic film industry has grown by 80% over the past ten years. “A giant leap in a relatively brief period of time,” the editor of the trade publication Klapptré told RÚV.

Considerable growth

In the last ten years, the Icelandic film industry has grown by ISK 15 billion ($107 million / €99 million) in operating revenues. As noted by Statistics Iceland, the operating revenue of the Icelandic film industry totalled ISK 12 billion ($85 million / €79 million) in 2012, compared to ISK 27.8 billion ($198 million / €183 million) in 2021.

Operating revenue refers to, “the total amount that a company registers to its books during the reference period and corresponds to the sale of goods or services to third parties, including export earnings.”

“A giant leap”

“There are fluctuations between years, but over a ten-year period – this is quite the leap,” Ásgrímur Sverrisson, editor of the trade journal Klapptré, told RÚV.

As noted by RÚV, the film industry is by far the largest cultural industry in Iceland today. Following closely behind is the media sector, with a turnover of approximately ISK 18 billion ($128 million / €119 million). Design and architecture have also experienced significant growth over the last decade.

The growth within the film industry is exemplified by the substantial increase in the number of operators, which now stands at nearly 800. “Just the other day, there was a general meeting of the directors’ association; before there were a few dozen directors. Today, there were around 200 people,” Ásgrímur remarked.

Besides the state’s reimbursement policy, and the efforts of employees and production companies, streaming services have also played a significant role in the growth of the Icelandic film industry: “They have certainly played their part in all of this, most notably the production of Katla, which was domestic content produced by Netflix.”

When asked if this meant that the long-awaited “summer of Icelandic film” (i.e. golden era) had finally arrived, Ásgrímur replied: “The fact is, that it has been spring, summer, autumn – and then winter, again and again.”

Inflation Dips Below 10%, Finance Minister Cautiously Optimistic

Bjarni Benediktsson icelandic politics

Despite the consumer price index increasing by 0.59% month-on-month, the annual inflation rate has decreased to 9.8% (down from 10.2% in February). The Finance Minister is hopeful that inflation has peaked. An economist with Landsbanki bank has stated that inflationary pressures remain high.

Inflation dips below 10%

Yesterday, the Central Bank published new figures on inflation on its website. According to the data, the annual inflation rate currently sits at 9.8%, down from 10.2% in February. This decline in inflation – which is commonly measured as the 12-month change in the consumer price index (CPI) – comes despite the CPI rising by 0.59% month-on-month in March. The increase in the CPI is to be explained by a 0.7% increase in food and beverage prices, a 4.3% increase in clothing and footwear, and a 0.8% increase in housing costs.

In an interview with RÚV, Una Jónsdóttir, Chief Economist with the Landsbanki bank, stated that the price reduction of furniture, household appliances, and similar products – which fell by 1.7%. – was the main reason why the annual inflation rate was subsiding.

“If, basically, the price of all volatile items used to calculate inflation are removed from the equation, then inflation actually increased month-on-month. So although it’s certainly positive to see inflation abate a little, it, nonetheless, remains very high. And the underlying pressures are still considerable.”

Una observed that it was hard to say whether this marked the beginning of a decline in inflation: “The new figures certainly support that, but how confident we are in it remains to be seen. The fact that we see underlying inflation increasing is not necessarily a positive sign.”

There are, however, several indications that inflationary pressures are slowly easing. Housing prices, for example, no longer create as much inflationary pressure, given that real-estate prices outside the capital area have fallen. The price of clothes and shoes, however, is now 2% higher than it was before these items went on sale. As noted by RÚV, there are many factors responsible for the current price increases: demand pressure, external price increases, and wage increases. The exchange rate has also not strengthened as expected.

Una concluded by saying that it was unlikely that the Central Bank’s latest rate hike had begun to have an effect: “We saw the inflation pressure decrease on the bond market. When the expectation is, going forward, that inflation will decline, it often serves as a kind of self-fulfilling prophecy.”

Finance Minister cautiously optimistic

Following a cabinet meeting yesterday, Finance Minister Bjarni Benediktsson was asked about the slight decline in the annual inflation rate.

“I think it’s best to hold back with the big statements,” Bjarni told Vísir. “But, on its own, this is a positive development, and hopefully, it’s an indication that inflation has peaked. We have seen large interest rate increases from the Central Bank, and the government finances this year are supporting lower inflation – we see it in a very large change in the performance of the treasury.”

Bjarni noted that the government would continue to take measures that would contribute to lowering the costs of goods and services – which was no small task: “When people have lost control of inflation expectations going into the future, to rebuild the belief that we can tackle this task and be successful – that’s what we’re focused on doing.”

The government’s new fiscal policy for the years 2023-2027 is to be presented today. Bjarni observed that the new policy would differ in its emphasis from the last. The new policy would take into account changes in external conditions.

“There are certain priorities from the government that need to take precedence, and by that, I mean inflation, in particular. So I think that the new fiscal policy will be an important contribution to this situation, and I am happy that, all in all, we can have a lot of faith in the future; it can be bright going forward in Iceland.”

Record Population Increase in Iceland

pedestrian street Laugavegur Reykjavík

Iceland’s population increased by 3.1% between January 2022 and January 2023: the largest increase since 1734 or as far back as population figures for Iceland go. The population was 387,758 on January 1 of this year, and had increased by 11,510 from last year, according to the latest figures from Statistics Iceland. Population increase was proportionally greatest in the southwest.

Proportionally greatest population increase in the Southwest

The population in the Reykjavík capital area increased by 2.8% between the start of 2022 and the start of 2023 or an increase of 6,651 residents. The southwest region showed the highest proportional increase in population, at 6.7%, or 1,941 residents. The population increase was 4.2% in South Iceland and 3.1% in West Iceland, which was above the country’s average. The population growth was proportionally lower in the Westfjords (2.4%), Northeast Iceland (2.0%) and East Iceland (1.8%). The smallest increase was in the Northwest, where the number increased by only 27 individuals or 0.4%.

Population decreased in 8 of 64 municipalities

There were 64 municipalities in Iceland on 1 January 2023, which is a decrease by five, due to merger. The municipalities are diverse in size of population. Reykjavík was the most populous with 139,875 inhabitants while Árneshreppur had the smallest population of 47 inhabitants. Twenty-nine municipalities had less than 1,000 inhabitants, but only eleven had 5,000 inhabitants or more. While the country’s overall population increased, the population decreased in eight of the country’s 64 municipalities.

Nearly two thirds of the population live in the capital area

About 63% of the population lived in the Reykjavík capital area at the start of this year, that is within the connected municipalities stretching from Hafnarfjörður to Mosfellsbær. This is a total of 242,995 people of the total population of 387,758. The second largest urban area in the country was Keflavík and Njarðvík, with 21,950 inhabitants. Akureyri, North Iceland and the surrounding area come in third at 19,887 inhabitants. Inhabitants in all of Iceland’s rural areas, defined as the countryside or localities with less than 200 inhabitants, totalled 22,752 individuals or 5.9% of the total population.

Anna Overtakes Guðrún as Most Common First Name for Women

The group was ready for their swim across the English Channel

Anna is now the most common first name for women in Iceland. The most common name for men is currently Jón.

This per a new name and birthday survey published by Statistics Iceland.

There are 4,782 women with the first name Anna in Iceland; 4,472 women are named Guðrún. Kristín (3,383), Sigríður (3,192), and Margrét (also spelled Margrjet and Margret; 2,838) round out the remaining top five women’s names. This is the first time that Guðrún has not been the most common first name for women in the country.

Most Common Given Names for Women, according to the National Registry, January 1, 2023; via Statistics Iceland

The top ten men’s names in Iceland have been the same since 2018. Jón is still the most popular, with 5,052 men bearing that name, followed by Sigurður (4,073), Guðmundur (3,838), Gunnar (3,074), and Ólafur/Olav (2,743).

Most Common Given Names for Men, according to the National Registry, January 1, 2023; via Statistics Iceland

Double names have always been popular in Iceland, and Statistics Iceland has also been keeping records on the most common combinations. The most common double names for women are currently: Anna María, Anna Kristín, and Anna Margrét. These haven’t changed since 2018. The top two double names for men have been the same since 2018: Jón Þór and Gunnar Þór. This year, however, there’s been a shake-up with the third most popular double name for men, with Arnar Freyr overtaking Jón Ingi.

Anna, Jón not among most popular names for babies born in 2021

Although Jón and Anna may enjoy top ranking when it comes to the most common names overall, they don’t make the cut for babies born in 2021. The top three girls’ names that year were Emilía, Embla, and Sara; the top three boys’ names were Aron, Jökull, and Alexander. Björk and Ósk were the most popular second or middle names for girls; Freyr and Máni were the most popular ones for boys.

More common to have a summer or fall birthday than a winter one

Unsurprisingly, summer and fall birthdays are more common in Iceland than winter ones (October – March). Just over half of birthdays in Iceland—51.5%—land between April and September.

It’s then even more unusual to have a birthday on a major winter holiday in Iceland. As of this year, a total of 1,246 people living in Iceland were born on January 1, New Year’s Day; 780 people have Christmas Day birthdays and 861 were born on Christmas Eve, December 24. A February 29 birthday is uncommon everywhere, and this is true in Iceland, too. Only 234 Icelanders have Leap Year birthdays.

Inflation Rate Continues Climb, Now at 9.9%

currency iceland

The latest indicators from Statistics Iceland show a month-by-month increase in the Consumer Price Index of 0.85%.

Inflation now rests at 9.9%, where it last sat in July 2022. Inflation rates saw slight decreases in the fall of 2022, but continued to rise throughout the winter.

See also: September Inflation Drops to 9.3%

Consumers in Iceland have especially felt the effect of inflation on food prices, with staples like milk, eggs, and cheese being especially affected at 4.4%.

Other consumer goods affected include alcohol (5,5%), tobacco (5.5%), and new vehicles (9.8%).

consumer price index iceland
Statistics Iceland

However, Statistics Iceland points out that many clearance sales after the holiday season have driven down the cost of some consumer goods in Iceland, such as clothing (-8.4%) and household appliances (-6.2%). Airfares have likewise decreased by around 9%.

With Efling trade union still in negotiations, read more about how interest rates could affect contract re-negotiations.

September Recording-Breaking Month for Tourism

tourism industry iceland

In a report by Statistics Iceland, overnight stays in hotel accommodations in Iceland are shown to be 7,144,400 for the year so far. This represents a 2% increase from 2018, the previous record-breaking year before the global pandemic.

Should the trend hold, 2022 could be the busiest year ever in the Icelandic tourism industry.

In September of this year, some 853,500 overnight stays in hotel accommodations were recorded, representing a 27% increase from September 2021. Approximately 81% of these overnight stays can be accounted for by foreign tourists, or around 691,000 stays. Icelanders and residents of Iceland accounted for the remaining 19%, at around 161,000 overnight stays. Compared with September 2021, this represents a slight decrease in the amount of domestic tourism, when Icelanders were generally more represented during the travel restrictions imposed by COVID-19.

 

tourism industry iceland
Hagstofa Íslands

Not surprisingly, the region of Iceland with the largest yearly increase was the capital region, with an 11.8% increase in overnight stays from September 2021 to September 2022. Following the capital region were West Iceland and the West Fjords, with an 8.3% increase in the same period.

The region least affected by the recent upswing was East Iceland, with a negligible 0.5% increase in overnight stays year-on-year.

The total supply of hotel rooms has also risen since last year. This summer saw an acute shortage of accommodations in Iceland, driving many prices up. Statistics Iceland reports now an 8% increase in hotel capacity, with an average occupancy over the year of around 79%.

 

Recent Halt in Domestic French Fry Production Raises Questions Concerning Tariffs

import tariff iceland french fries

When Icelandic frozen- and ready-made food company Þykkvabæjar stopped producing french fries earlier this summer, they were the last remaining producer of the popular side dish in Iceland.

Now, with no domestic producers left, all french fries in Iceland must be imported. The lack of domestic production, however, has raised questions over what, exactly, protectionist tariffs are protecting.

In a recent report by the National Association of Employers, it came to light that Icelandic consumers have paid a total of ISK 800 million in french fry tariffs in the past two and a half years.

Those imported from Canada and the EU are taxed at a rate of 46%, and french fries from elsewhere are taxed at a much higher 76%. Given the growing share of the tourism and service industries, this cost is not trivial.

The National Association of Employers has petitioned the Minister of Finance to repeal the tariffs, stating that they no longer protect anything and only hurt the consumer.

Ólafur Stephensen, managing director of the National Association of Employers, has cited the french fry tariff as one more unnecessary burden. During a time of high inflation, he stated, such burdens should be minimized as far as possible: “These numbers clearly show that there is a lot at stake for Icelandic consumers, the trade and the restaurant sector to abolish this protectionist tariff that no longer protects anything. The duties amount to 300-400 million per year and at a time when food prices are constantly rising, such sums make a difference.”

Ólafur, along with other consumer-advocacy groups, has since called on the Minister of Finance to repeal the tariff.

 

 

More Overnight Stays Booked This June Than Pre-Pandemic

Icelandair Marina Hotel

Foreign tourists booked 405,000 overnight stays in Icelandic hotels in June 2022, which is an increase of 6%, or roughly 23,000 more stays than were booked in June 2019, before the COVID-19 pandemic. Túristi reports that there was also a jump in hotel bookings among Icelanders, with just over 91,000 overnight stays booked in June 2022, as compared to 38,000 in June 2019.

These were among the findings in a new report issued by Statistics Iceland on Friday.

Americans have had by far the most overnight bookings in Iceland over the years: 127,163 in 2019 up to 140,651 in 2022, for an increase of 11% between the years. Icelanders had the second most overnight bookings in June 2022, or 91,388 to be exact. Percentage-wise, this is the most significant increase by nationality since the pre-pandemic years. Germans had the third most bookings by total in June 2022: 58,453, or a 27% increase from the 46,170 overnight stays they booked in June 2019. In terms of percentage increases, however, Italians had the next highest increase in overnight June bookings after Icelanders: 11,728 in June 2022, or an increase of 89% from 6,200 in June 2019.

The new figures show that between June of this year and last year, 2021, occupancy rates around Iceland went up from 40% to 78.8%. Regionally, the biggest jump in hotel bookings was, unsurprisingly, in the capital region, with 5,400 hotel rooms booked in 2022 versus 3,277 in 2021. The second largest increase was seen in the Southwest: 1,017 in 2022, up from 880 in 2021. East Iceland has seen the least change in overnight stays in the last year, with only two more overnight stays booked in 2022 (441) than in 2021 (439).

Take a look at a summary of Statistics Iceland’s new overnight stay data on their website, in English, here.

Biggest Residential Construction Boom Outside of the Capital Since Crash

architecture Gardabær buildings crane urban planning

There are more apartments under construction outside the capital area than there have been since 2008. Vísir reports that there are currently 2,672 apartments being built outside of Reykjavík, the largest share of which—1,100 units—are located in South Iceland.

These figures come via the latest economic outlook report published by Landsbankinn’s economic department. The report also states that based on figures from Statistics Iceland, it appears that apartment prices both in- and outside of the capital are developing in a similar way, although apartment prices outside of the capital are actually rising faster.

Sales have gone up and prices have risen

There’s been a great deal of demand for housing over the last few years and the economic outlook report says that post-pandemic, low interest rates and changing consumption habits have boosted demand considerably. Sales have gone up and prices have risen.

Since last July, the residential market price index has gone up 22% for single-family homes in the capital area, while multi-family units have gone up by 24%. But the index outside the capital over the last twelve months has gone up even more: 29%.

Taking a broader snapshot of housing price increases across the board: compared to pre-pandemic, in February 2020, the residential market price index has gone up between 45 – 47%, regardless of whether it’s single- or multi-family homes in question, within the capital, or outside of it.

Most new builds in South Iceland, fewest in the East, Northwest, and Westfjords

Construction outside the capital is split pretty evenly between multi-unit and single-family residences. So far this year, there’s been a 12% increase in the number of apartments under construction, as compared to an over 33% increase between the end of 2020 and the early months of 2021. Before that, between 2009 and 2016, very few new apartments entered the real estate market, although there were many under construction.

The greatest proportion of new residential builds outside the capital area are, as mentioned, in South Iceland. The housing stock in the region has gone up by 4% in the last year, amounting to almost 500 new apartments. In the first seven months of this year, the stock increased by 1.7%, or just over 200 new apartments.

The housing stock on the Suðurnes peninsula alone has gone up by 2.5% since the start of the year; in 2021, it went up by almost 2% in the course of the year. This is on par with the increase of housing stock throughout all of North Iceland combined, where 260 new apartments were completed last year.

There are currently 500 apartments under construction on Suðurnes and in West Iceland, around 350 in Northeast Iceland, and fewer than 100 in East Iceland, Northwest Iceland, and the Westfjords.