According to preliminary figures from the National Accounts, the nominal Gross Domestic Product (GDP) amounted to 1,199 billion ISK in the third quarter of 2024, reflecting a real contraction of 0.5% compared with the same period in the previous year. The contraction is largely attributed to a weaker balance of external trade in services.
In the third quarter, national expenditure is estimated to have increased by 0.8% in real terms compared with the third quarter of 2023. Among the components of national expenditure, private consumption is estimated to have grown by 0.8%, public consumption by 3.1% and gross fixed capital formation by 2.3%, while inventories contracted by 0.8%.
Seasonally adjusted figures indicate that GDP contracted by 1.1% between the second and third quarters of 2024.
Reduced surplus in trade in services drives contraction
Despite a positive balance in external trade in services of 140 billion ISK in the third quarter, the surplus was notably lower than in the same period of 2023. The reduced surplus in trade in services had a negative impact on GDP growth of nearly 2%.
The balance of trade in goods remained in deficit during the third quarter, although the deficit was slightly smaller compared with the same period last year. As a result, the contribution of external trade in goods to GDP growth was positive and was around 0.1%.
Overall, the net contribution of foreign trade to GDP growth in the third quarter was negative and was around 1.8%.
Private consumption increased by 0.8%
Private consumption increased by 0.8% in real terms in the third quarter compared with the same period last year. The most significant factor was a 3% increase in Icelanders' consumption abroad. Additionally, household spending on services and housing showed slight growth. There was a significant decline in the consumption of durable goods, such as car purchases, which is similar to the trend in the first and second quarters.
Public consumption increased by 3.1%
The volume change in public consumption in the third quarter of 2024 compared with the same period in 2023 is estimated at 3.1%. The results for government finances for the third quarter of 2024 will be published on 5 December.
Gross fixed capital formation increased by 2.3%
Gross fixed capital formation (GFCF) is estimated to have increased by 2.3% in real terms in the third quarter of 2024 compared with the same period in the previous year. Residential construction is estimated to have risen by 10.7%, while capital formation in the public sector increased by 2.2%.
Preliminary results, however, indicate a slight decline of capital formation in the business sector, by 0.2%.
Increased inventories between quarters
In the third quarter of 2024, the total value of inventories increased by 5.2 billion ISK at the year’s price level between consecutive quarters. This increase is primarily attributed to an increase in the inventory levels of marine products by 6.6 billion ISK.
GDP growth in the first nine months of the year
For the first nine months of the year, GDP is estimated to have decreased by 1.0% in real terms compared with the corresponding period of 2023. At the same time, gross final expenditure increased by 0.6%, of which HFCE grew by 0.2%, GFCE by 2.7% and GFCF by 3.8%. Exports decreased by 2.1% while imports grew by 1.4%
Seasonally adjusted GDP fell by 1.1%
Seasonally adjusted gross domestic product (GDP) decreased in real terms by 1.1% in the third quarter of 2024 compared with the second quarter. During this period, seasonally adjusted private final consumption expenditure increased by 0.1% and government consumption by 0.7% while there was a 4.6% decrease in gross fixed capital formation. At the same time, seasonally adjusted exports contracted by 1.5%, and imports contracted by 1.1% in real terms.
Revision 2023
A minor revision was made in the fourth quarter of 2023. It affected both GFCF and trade in goods, but cancels each other out and has thus no significant effect on GDP.
Planned benchmark revision and change of reference year
A benchmark revision of national accounts is scheduled to be published at the end of May 2025. The revision is in accordance with the harmonised European revision policy for macroeconomic statistics.
Concurrently with the benchmark revision, the reference year for chain-linked volumes will be 2020 instead of 2015, as has been the case since 2020. Further details of the revision will be reported in May 2025.