Household gross disposable income is estimated to have decreased by 1.5% in the second quarter of 2022, compared with last year’s corresponding quarter. In 2021, the purchasing power of household disposable income per capita increased by 5.4% from 2020.
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 2021, 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 9.1% in the second quarter of 2022, compared with last year’s corresponding quarter. Disposable income per capita amounted to close to 1.25 million ISK in the quarter and is estimated to have increased by 6.3% compared with the second quarter of 2021. Due to increased inflation rate, the purchasing power of household disposable income per capita in the second quarter of 2022 decreased by 1.5% compared with last year’s corresponding quarter, but the consumer price index increased by 7.9% during the same period.
Total income of the household sector increased by 9.5% in the second quarter of 2022, compared with the second quarter of the previous year. The largest increase was in wages and salaries which are estimated to have increased by 16.8% from last year’s corresponding quarter. It is estimated that property income increased by 17.3% during the same period, but income from interests increased by 45%. Social benefits decreased by 2.9% 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 roughly 10% in the second quarter of 2022 compared with the second quarter of the previous year. Taxes on income are estimated to have increased by 1.7% and that net social contributions increased by 16.8% from last year’s corresponding quarter. Property expenditure is estimated to have decreased by 11.9% in the second quarter of 2022 compared with last year’s corresponding quarter where interest payments decreased by 12.3% during the same period which can largely be attributed to the decrease 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 5.4% in 2021
In March, Statistics Iceland published preliminary figures for the year 2021 and has now published revised figures. The purchasing power of household disposable income per capita increased by 5.4% in 2021. Disposable income per capita increased by 10.1% and household gross disposable income increased by 11.9% from 2020 to 2021. Total income of the household sector increased by 9.4% while total expenses increased by 6.3% during the same period.
From 2020 to 2021, income from wages and salaries increased by 9.4% while taxes on salaries increased by 4.4%. Social benefits other than social transfers in kind increased by 6.5% from 2020 to 2021. 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.