Household gross disposable income is estimated to have decreased by 0.3% in the second quarter of 2021, compared with last year’s corresponding quarter. In 2020, the purchasing power of household disposable income per capita increased by 2.5% from 2019.
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 2020, as well as quarterly estimates for the Icelandic household sector. 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 5.5% in the second quarter of 2021, compared with last year’s corresponding quarter. Disposable income per capita amounted to close to 1.1 million ISK in the quarter and is estimated to have increased by 4.1% compared with the second quarter of 2020. Due to increased inflation rate, the purchasing power of household disposable income per capita in the second quarter of 2021 decreased by 0.3% compared with last year’s corresponding quarter, but the consumer price index increased by 4.4% during the same period.
| Quarterly household disposable income 2020-2021 | ||||||
| Million ISK | 2020-Q1 | 2020-Q2 | 2020-Q3 | 2020-Q4 | 2021-Q1 | 2021-Q2 |
| 1. Income | 660,819 | 707,988 | 697,569 | 707,993 | 712,014 | 763,139 |
| D.1 Compensation of employees, receivable | 384,357 | 396,328 | 407,059 | 408,638 | 401,752 | 435,877 |
| D.4 Property income | 43,204 | 41,523 | 40,830 | 42,426 | 43,264 | 44,097 |
| - D.41 there of interest | 14,071 | 12,264 | 11,793 | 13,709 | 14,176 | 12,952 |
| D.62 Social benefits other than social transfers in kind | 104,098 | 133,549 | 118,507 | 125,930 | 123,280 | 131,728 |
| Other income1 | 129,160 | 136,587 | 131,174 | 131,000 | 143,718 | 151,436 |
| 2. Expenditure | 305,288 | 306,927 | 310,995 | 315,735 | 324,397 | 339,925 |
| D.4 Property expenditure | 20,728 | 18,445 | 19,564 | 21,835 | 23,932 | 21,397 |
| - D.41 there of interest | 20,087 | 17,823 | 18,899 | 21,119 | 23,366 | 20,865 |
| D.5 Current taxes on income, wealth, etc. | 113,625 | 118,823 | 122,833 | 123,294 | 123,493 | 135,837 |
| D.61 Net social contributions | 110,414 | 110,953 | 112,821 | 116,180 | 110,270 | 115,278 |
| Other expenditure2 | 60,521 | 58,706 | 55,776 | 54,428 | 66,701 | 67,412 |
| B.6G Disposable Income (1. - 2.) | 355,531 | 401,061 | 386,575 | 392,258 | 387,617 | 423,214 |
| Disposable income per capita (in thousand ISK) | 971 | 1,094 | 1,050 | 1,064 | 1,048 | 1,139 |
| Relative change in purchasing power of disposable income per capita (%) | 0.7% | 5.4% | 0.3% | 3.1% | 3.5% | -0.3% |
| 1Other income include output (P.1) and other current transfers (D.7) receivable. | ||||||
| 2Other expenditure include intermediate consumption (P.2), compensation of employees (D.1) payable, taxes on production and imports (D.2) and other current transfers (D.7) payable. | ||||||
Total income of the household sector increased by 7.8% in the second quarter of 2021, compared with the second quarter of the previous year. The largest increase was in wages and salaries which are estimated to have increased by 10% from last year’s corresponding quarter. It is estimated that property income increased by 6% during the same period, but income from interests increased by 5.6%. Social benefits decreased by 1.4% after having increased excessively during the corresponding quarter of last year due to the measures taken by the Icelandic government to mitigate the economic impact of the Covid-19 pandemic.
Total expenditure of the household sector increased by 11% in the second quarter of 2021 compared with the second quarter of the previous year. Taxes on income are estimated to have increased by 14% and that net social contributions increased by 3.9% from last year’s corresponding quarter. Property expenditure is estimated to have increased by 16% in the second quarter of 2021 compared with last year’s corresponding quarter where interest payments increased by 17% during the same period which can largely be attributed to the increase in the level of household real estate investments during the period.
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 increased by 2.4% in 2020
In April, Statistics Iceland published preliminary figures for the year 2020 and has now published revised figures. The purchasing power of household disposable income per capita increased by 2.4% in 2020. Disposable income per capita increased by 5.3% and household gross disposable income increased by 7.0% from 2019 to 2020. Total income of the household sector increased by 3% while total expenses decreased by 1.6% during the same period.
| Household disposable income 2017-2020 | ||||
| Million ISK | 2017 | 2018 | 2019 | 2020 |
| 1. Income | 2,369,534 | 2,574,121 | 2,694,532 | 2,774,370 |
| D.1 Compensation of employees, receivable | 1,427,269 | 1,574,433 | 1,621,511 | 1,596,382 |
| D.4 Property income | 171,504 | 157,823 | 165,607 | 167,983 |
| - D.41 there of interest | 53,388 | 55,610 | 58,750 | 51,837 |
| D.62 Social benefits other than social transfers in kind | 307,648 | 336,916 | 385,875 | 482,083 |
| Other income1 | 463,114 | 504,950 | 521,539 | 527,921 |
| 2. Expenditure | 1,138,526 | 1,214,780 | 1,259,408 | 1,238,945 |
| D.4 Property expenditure | 89,929 | 89,662 | 94,204 | 80,571 |
| - D.41 there of interest | 87,730 | 87,045 | 91,698 | 77,928 |
| D.5 Current taxes on income, wealth, etc. | 400,036 | 433,739 | 459,738 | 478,574 |
| D.61 Net social contributions | 417,855 | 440,017 | 454,066 | 450,368 |
| Other expenditure2 | 230,706 | 251,362 | 251,399 | 229,431 |
| B.6G Disposable Income (1. - 2.) | 1,231,008 | 1,359,341 | 1,435,124 | 1,535,425 |
| Disposable income per capita (in thousand ISK) | 3,585 | 3,854 | 3,980 | 4,190 |
| Relative change in purchasing power of disposable income per capita (%) | 6.6% | 4.7% | 0.2% | 2.4% |
| 1Other income include output (P.1) and other current transfers (D.7) receivable. | ||||
| 2Other expenditure include intermediate consumption (P.2), compensation of employees (D.1) payable, taxes on production and imports (D.2) and other current transfers (D.7) payable. | ||||
From 2019 to 2020, income from wages and salaries decreased by 1.5% while taxes on salaries increased by 4.1%. This tax increase is due to a change in the Icelandic tax system where the number of tax brackets was increased and the personal tax allowance was decreased.
Social benefits other than social transfers in kind increased by 25% from 2019 to 2020. This increase is mainly due to the increase in general unemployment benefits, the payment of partial unemployment benefits, additional child support supplement, and temporary permission to withdraw voluntary pension savings (third-pillar pension savings).
Previous years have been revised. Due to improved data sources, the compilation for households’ gross operating surplus has been revised from the year 2000 onwards. These revisions have a feedback effect on the compilation of households’ gross disposable income.
Methodology and data sources
Non-financial sector accounts utilise figures and indicators found in the expenditure approach, production approach and public finance statistics.
Household disposable income is defined according to the European system of accounts (ESA 2010) as the sum of compensation of employees (D.1) receivable, property income (D.4), social benefits other than social transfers in kind (D.62) and other income which include output (P.1) and other current transfers (D.7), subtracted by property expenditure (D.4), taxes on income (D.5), net social contributions (D.61) and other expenditure which includes intermediate consumption (P.2), compensation of employees (D.1) payable, taxes on production and imports (D.2) and other current transfers (D.7) payable.
Estimating preliminary figures for household disposable income, six key factors are considered:
Data sources used for estimation procedures include PAYE (Pay As You Earn) tax register, preliminary accounts from Iceland Revenue and Customs, the Financial Management Authority and financial statements from local municipalities as well as data collected from the Ministry of Finance and Economic Affairs and the Central Bank of Iceland.
Further information on the methodology of the non-financial sector accounts are in a Statistical Series from 2014.