Gross domestic product (GDP) is estimated to have increased by 7% in volume in the first quarter of 2023 compared with the same period last year. Gross domestic final expenditure increased by 4.5% in volume during the quarter, where household final consumption expenditure increased by 4.9% and government final consumption expenditure by 1.7% while gross fixed capital formation is estimated to have decreased by 0.1%.
External trade contributes positively to GDP growth during the quarter. Exports increased by 10.8% in volume, primarily due to increasing service exports. The import side shows a modest growth but balance of trade in goods and services amounts to -2.5% of the quarter’s GDP.
Seasonally adjusted GDP increased by 0.3% in volume in the first quarter of 2023 compared with the fourth quarter of 2022.
Household consumption growth continues
Household final consumption expenditure continues to grow and is estimated to have increased by 4.9% in volume year-over-year during the first quarter of 2023. As with previous quarters, the growth can largely be attributed to an increase in travel-related categories of consumption. Strong private consumption despite significant price increases could be an indication that households are to some extent using savings to make ends meet. Figures on household disposable income will be published on 14 June 2023.
Moderate increase in government consumption
Government final consumption expenditure increased by 1.7% during the first quarter compared with last year’s corresponding quarter. Figures on public finances for the first quarter of 2023 will be published on 8 June 2023.
Transition in investment
Capital formation has been driving growth to an extent over the previous quarters. That changed in the first quarter where in real terms there was only a slight decrease in gross fixed capital formation of 0.1% compared with the same period last year. It was mainly caused by a large decrease in residential investment of 14.4% in volume compared with the first quarter of 2022. Following strong growth of residential construction in 2016-2020, construction has been slowing down, but still remains at a higher level than it was post-financial crisis.
As usual, business sector investment was the largest subcomponent of the quarterly capital formation and is estimated at over 135 billion ISK and increases in volume by 3.6% year-over-year during the first quarter of 2023. Moreover, it is estimated that government investment increased by 7.1% in volume in the same period.
External trade
Exports have grown significantly over the last few quarters and continue to grow on this year’s first quarter. The total exports of goods and services are estimated to have increased by 10.8% in volume in the first quarter of this year compared with the same period last year. Exports of services increased by 24.7% during the period, which is primarily explained by a strong recovery in the tourism industry. The increase in exports of goods is estimated at 1.1% in volume during the first quarter, compared with the same period last year.
Imports also show a difference in development between goods and services. It is estimated that imports of goods decreased by 0.2% in volume during the quarter compared with last year’s corresponding quarter, while service imports increased by 12.4% in the same period.
The total deficit in the balance of trade in goods and services is estimated at 24.2 billion ISK in the first quarter of 2023 or -2.5% of the quarter’s GDP, of which the deficit in the balance of trade in goods was 45.7 billion ISK and a surplus in the balance of trade in services of 21.4 billion ISK at current prices.
Increase in stock of inventories
According to inventory reports, the total value of inventories increased by 38.5 billion ISK, at current prices, in the first quarter of 2023 compared with the fourth quarter of 2022. As usual the stock of marine products increases at the beginning of the year, but this time the increase was unusually high, or 35.9 billion ISK. Stock of oil decreases by around 800 million ISK, while the stock of aluminium and other industrial materials increased by 3.3 billion ISK during the period.
Employment continued to rise in the first quarter
The total number of hours worked is estimated to have increased by 5.6% in the first quarter of 2023 compared with the same period in 2022, with the number of employed persons growing by almost the same or 5,5% during the same period according to national accounts measurements. Looking at individual industries, the most noticeable increase of hours worked is in construction, retail, transport and catering while the smallest change happens to be in the public sector.
Seasonally adjusted GDP increased by 0.3% between quarters
Seasonally adjusted GDP increased in volume by 0.3% in the first quarter of 2023 compared with the previous quarter, the fourth quarter of 2022. Seasonally adjusted, household consumption expenditure increased by 1.1% during the quarter compared with the previous quarter while there was a 0.3% increase in government consumption expenditure and a 11.5% decrease in investment. During the same period, seasonally adjusted exports decreased by 2.4% and imports by 7%.