Please note that this press release was corrected on 3 October 2023 from the original version. There was an error in the calculations of the purchasing power of disposable income per capita for the year 2022. The purchasing power of disposable income per capita decreased by 0.1% in 2022, which is a change from the original version where it was assumed that purchasing power per capita had increased by 2.4% during the year. The decline in purchasing power per capita in 2022 affected the estimated purchasing power of disposable income in the first half of 2023. Thus, it is estimated that the purchasing power of disposable income per capita in the second quarter of 2023 has decreased by 5.2% instead of 6.1% in previously published figures.
The purchasing power of household disposable income per capita is estimated to have decreased by 5.2% in the second quarter of 2023, compared with last year’s corresponding quarter. In 2022, the purchasing power of household disposable income per capita decreased by 0.1% from 2021.
Statistics Iceland has published annual figures for non-financial sector accounts, covering the five economic sectors in the Icelandic economy and the rest of the world for the year 2022, as well as quarterly estimates for the Icelandic household sector for the second quarter of 2023. These figures do not contain new estimates for GDP or its components, but are in part compiled from the production and expenditure approaches, where the emphasis is on tracking current and capital transfers across sectors.
Inflation rate drives down purchasing power in the second quarter
Household gross disposable income is estimated to have increased by 7.3% in the second quarter of 2023, compared with last year’s corresponding quarter. Disposable income per capita amounted to roughly 1.3 million ISK in the quarter and is estimated to have increased by 3.8% compared with the second quarter of 2022. Due to increased inflation rate, the purchasing power of household disposable income per capita in the second quarter of 2023 decreased by 5.2% compared with last year’s corresponding quarter, but the consumer price index increased by 9.4% during the same period.
Total income of the household sector increased by close to 11.6% in the second quarter of 2023, compared with the second quarter of the previous year. The largest increase was in wages and salaries which are estimated to have increased by almost 12% from the previous year‘s corresponding quarter. It is estimated that property income increased by 31% during the same period, but income from interests increased by almost 60%. Social benefits increased by 6.4% which can be attributed to a 20% increase in pension.
Total expenditure of the household sector increased by 17.2% in the second quarter of 2023 compared with the second quarter of the previous year. Taxes on income are estimated to have increased by 12% and that net social contributions increased by 8% from last year’s corresponding quarter. Property expenditure is estimated to have increased by 59.1% in the second quarter of 2023 compared with last year’s corresponding quarter where interest payments increased by 61.3% during the same period which can largely be attributed to a vast increase in interest rates.
These are preliminary figures and thus Statistics Iceland will continue to publish revised figures when exhaustive information is available, e.g. tax returns from corporations and individuals.
The purchasing power of disposable income per capita decreased by 0.1% in 2022
In March, Statistics Iceland published preliminary figures for the year 2022 and has now published revised figures. The purchasing power of household disposable income per capita decreased by 0.1% in 2022. Disposable income per capita increased by 8.2% and household gross disposable income increased by 11% from 2021 to 2022. Total income of the household sector increased by 13.6% while total expenses increased by 17.2% during the same period.
From 2021 to 2022, income from wages and salaries increased by 15.3% while taxes on salaries increased by 18.4%. Social benefits other than social transfers in kind remained static from 2021 to 2022 where pension income increased by 11.3% while social benefits from social security funds decreased by 9.1%. Previous years have been revised. Along with an update due to improved data sources, D.613 (Households' actual social contributions) and D.611 (Employers' actual social contributions) have also been revised from 2015-2022.