According to preliminary estimate, gross domestic product (GDP) increased by 1.2% in the third quarter of 2025 compared with the same period of the previous year. Household final consumption, which expanded by 4.2%, is the main contributor to growth, while gross fixed capital formation and government consumption also increased, by 2.2% and 0.9% respectively.
Taking inventory changes into account, gross domestic final expenditure is estimated to have increased by 4.7%. There was a widening trade deficit in goods and services compared with the same period last year, resulting in a negative contribution from net exports to real GDP growth of 4.5%.
Seasonally adjusted figures indicate that GDP declined by 0.2% in real terms between the second and third quarters of 2025. For the first nine months of the year, GDP is estimated to have grown by 1.5% in real terms compared with the corresponding period in 2024.
It should be noted that, alongside the publication of third-quarter GDP, previously released figures have been revised back to 2023. These revisions are discussed in more detail below.
Private consumption increased by 4.2%
Private consumption in the third quarter increased by 4.2% in real terms compared with the same period of the previous year. Domestic consumption rose overall, driven by increased household spending on service-related consumer goods. However, there was a decline in categories such as clothing, reflecting exchange-rate effects. Household purchases of motor vehicles increased for the third consecutive quarter following a period of decline in the previous year. Private consumption was also boosted by substantial growth in Icelanders’ expenditures on travel abroad, alongside modest growth in housing.
Government final consumption increased by 0.9%
Government final consumption expenditure is estimated to have increased by 0.9% in the third quarter compared with the same period of the previous year. In nominal terms, government consumption is estimated to have risen by 8.9% year-on-year, while prices are estimated to have increased by 7.9% over the same period, resulting in a real growth rate of 0.9%.
Further details on government finance will be published on 11 December.
Increase in GFCF by 2.2%
Gross fixed capital formation (GFCF) is estimated to have increased by 2.2% in real terms in the third quarter of 2025. Thereof, business sector GFCF is estimated to have increased by 11.3% in real terms. However, residential housing GFCF is estimated to have decreased by 10.3% during the same period and, and public sector GFCF by 15.8%.
Reduced surplus in trade of goods and services
The trade balance in goods and services is estimated to have been 35.8 billion ISK in the third quarter compared to 56.6 billion ISK in the same quarter of the previous year. As a result, the reduced surplus in trade had a negative contribution of 4.5% to real GDP growth in the third quarter.
Inventory changes increased by 21 billion ISK
The total value of inventories increased by 20.9 billion ISK in the third quarter of 2025 compared with the second quarter. The largest contribution came from a positive change in the fisheries sector, amounting to 17.6 billion ISK. This increase is in line with historical third quarter developments, although inventory accumulation was significantly lower in the third quarter of 2024 due to the capelin shortage.
Despite the continued absence of capelin, inventories of pelagic species in general increased, as did stocks of fishmeal and fish oil. The value of oil inventories remained virtually unchanged, rising by 23 million ISK. At the same time, the total value of inventories in aluminium, aluminium products, and silicon metal also increased by 3.2 billion ISK.
Seasonally adjusted GDP contracted by 0.2%
Seasonally adjusted GDP contracted by 0.2% in real terms in the third quarter of 2025 compared with the second quarter. This marks the second consecutive quarterly decline, as updated figures for the second quarter show a contraction of 0.4% compared with the first quarter of the year.
A closer breakdown reveals that in the third quarter of 2025, private consumption increased by 1.2% on a seasonally adjusted basis, while public consumption rose by 0.5%. Gross fixed capital formation, however, declined by 7.4%. Over the same period, seasonally adjusted exports fell by 2.4% and imports also decreased or by 4.8%.
Revision of Previously Published Figures
On this occasion, it is important to note that in official statistical production, early estimates are often released on a very timely basis. Such figures are labelled as preliminary or provisional and are based on the best information available at the time of publication. As more complete and higher-quality data become available, provisional figures are subsequently revised.
Comprehensive new data on gross fixed capital formation (GFCF) of enterprises for 2024, as well as more complete data for 2023, are now available. These data are based on corporate tax returns of enterprises and self-employed individuals. Historically, new information from tax returns has been incorporated into the national accounts in time for the February release each year. This processing has now been brought forward by three months, ensuring more timely and reliable results.
As noted in the recent release on external trade in goods and services, those data have also been revised. During the compilation of third-quarter results, discrepancies were identified in the administrative data underlying the calculation of external trade. Further investigation, including consultation with major exporting firms, indicated that previously published figures for exports of goods and services required revision back to 2023.
The revision primarily affects goods trade, with goods exports in the balance of payments reduced by 6 billion in 2023 and by 3.8 billion in 2024, but increased by 11.2 billion in the first two quarters of 2025. Likewise, imports of services increase by 1.7 billion in 2023 and by 5.5 billion in 2024, but decline by 4.1 billion in the first two quarters of 2025. Exports of services are also revised down by 9.1 billion in the first two quarters of 2025.
The incorporation of new data on gross fixed capital formation, together with the adjustments to external trade statistics, results in measured GDP growth for 2023 now standing at 5.1%, compared with 5.2% previously. For 2024, the economy is now estimated to have contracted by 1.2%, a slightly larger decline than in earlier published figures (-1.0%).
The production approach
Data for the production approach have been updated on the website of Statistics Iceland in parallel with the updated expenditure approach. The preliminary figures for the year 2024 have been updated with the arrival of annual tax data for companies, as well as updates for 2023. There have also been made several processing and data improvements. The multi-industry classification of companies operating in more than one industry was updated, which applies especially to companies in the fishing industry, fish processing and sales or related industries. Consumption of fixed capital and intermediate consumption were updated in industry 68, due to new data on residential real estate assets. Improvements were made in industry 93 back to the year 2018. Three other changes were also made that affect broad industry categories: a few companies had their industry category reclassified, information was manually entered for some companies that did not submit figures and foreign companies selling online services were excluded.