Gross domestic product GDP is estimated to have decreased by 4% in volume in the first quarter of 2024 compared with the same period last year. Household final consumption expenditure increased by 0.2%, government final consumption expenditure by 1.2% and gross fixed capital formation by 2.4%; however, taking inventory changes into account, it is estimated that gross domestic final expenditure has decreased by 2.4% in real terms.
There was an increased deficit in trade in goods and services with foreign countries in the first quarter compared with the previous year, which means that the contribution of external trade to economic growth was negative by 1.4%.
In the first quarter, seasonally adjusted GDP is estimated to have decreased by 0.9% in real terms compared with the fourth quarter of 2023.
Inventory changes weigh heavily in GDP
According to inventory reports, the total value of inventories increased by 3.3 billion ISK at current prices in the first quarter of 2024 compared with the fourth quarter of 2023, which can mostly be attributed to the increase in stocks of marine products. Oil stocks fell by 1.5 billion ISK, while stocks of aluminum, ferrosilicon and other consumables increased by 500 million ISK.
These are significant changes from the first quarter of last year, when there was a 38.5 billion ISK increase in the total value of inventories, or 35 billion ISK more than the increase measured now. The reason can be traced to the stock status of marine products, as last year, a large capelin season had a significant impact on inventory growth in the first quarter. No fishing quotas for capelin were issued in the first quarter of this year. The impact of these changes in the accumulation of marine inventories in the first quarter, compared with the same period last year, weighs heavily in the assessment of the change in GDP at constant prices. Thus, the contribution of inventory changes to economic growth is a 3.5% decrease in the first quarter of 2024.
Private consumption increased by 0.2%
Private consumption remained almost unchanged, increasing by 0.2% from the same period last year. Domestic household private consumption generally declined, reducing the strength of total private consumption. There was a significant decrease in the consumption of durable goods such as car purchases. Additionally, the growth in household purchases of semi-durable goods was slower. On the other hand, there was a growth in private consumption expenditures on travel abroad, along with a growth in housing and healthcare expenditures.
Government final consumption increased by 1.2%
It is estimated that the growth of GFCE was about 1.2% in the first quarter of 2024 compared with the same period last year. The results on public sector finances in the first quarter of 2024 will be published on 6 June.
Gross fixed capital formation increased by 2.4%
In the first quarter, there was a 2.4% real increase in capital formation compared with the first quarter of 2023. The increase in capital formation can mostly be attributed to increased housing investments, which is estimated to have increased by 15.7% compared with the first quarter of 2023. It is estimated that the economic capital formation also increased slightly or by 0.4%. However, initial indications suggest that public sector capital formation decreased by 5.8% in the first quarter, but there is some uncertainty about public sector investment as the total results for government investments are not yet available.
It is believed that capital formation in the first quarter amounted to more than 246 billion ISK, and as before, the largest part was the capital formation of the business sector, which amounted to 167 billion ISK.
Increased external trade deficit
It is estimated that trade in goods and services with foreign countries was negative by almost 43 billion ISK in the first quarter, which is considerably more than in the same quarter last year when the deficit amounted to 19 billion ISK. The increased trade deficit thus negatively impacts GDP by 1.4%.
It is important to note the quality of certain underlying data, which, along with other data sources, form the basis for the calculation of service trade with foreign countries. Further verification of this data is underway, though it is not expected to have a significant impact on the overall result.
The amount of work hours decreased by 1.7% year-on-year
It is estimated that the total number of hours worked decreased by 1.7% in the first quarter of 2024 compared with the same period in 2023, while the number of employed persons has increased by 2.1%. Looking at specific industries, it becomes apparent that there is a decline in almost all sectors except for the number of working hours in construction.
Seasonally adjusted GDP fell by 0.9%
Seasonally adjusted, GDP decreased in real terms by 0.9% in the first quarter of 2024 compared with the fourth quarter of 2023. Seasonally adjusted, private final consumption expenditure increased by 1.8% during the period compared with the previous quarter while there was a decrease of 0.4% in government final consumption and a 1.4% decrease in gross fixed capital formation. Furthermore, a contraction of 2.3% and 0.4% was measured in exports and imports respectively.