CPI rise outpaces forecasts

According to figures released recently by Statistics Iceland (SI), the consumer price index (CPI) rose 0.68% month-on-month in February, and headline inflation now measures 2.2%, up from 2.1% in January. The CPI excluding housing rose by 0.69% during the month, and twelve-month inflation thus measured was 0.7%.

The error in our forecast is due for the most part to larger end-of-sale rises in the price of clothing and footwear, furniture and housewares, and electronic equipment. The housing component also rose in excess of our forecast, and food prices did not decline, as we had expected. 

The rise in the CPI exceeds official forecasts. We had forecast a rise of 0.5% month-on-month, whereas forecasts lay in the 0.3-0.6% range. 


  • Clothing and footwear prices rose 6.4% (0.25% CPI effect). Of that increase, clothing prices rose 12.7% and footwear prices 14.9%. 
  • Furniture and housewares prices rose 7.6% (0.3% CPI effect). This is well above our forecast, and it appears that the steep decline in January is reversing.
  • Air transport prices declined by 9.9% (-0.15% CPI effect), including an 11.9% drop in international airfares (-0.16% CPI effect).
  • Petrol prices fell 1.6% (-0.05% CPI effect).
  • The housing component of the CPI rose by 0.7% (0.19% CPI effect). Of that amount, imputed rent rose by 1.0% (0.16% CPI effect), and other items raised the index by 0.03%.
  • Food and beverage prices were virtually unchanged. 

Our preliminary CPI forecast provided a rise of 0.5% in March, and 0.2% in April. According to the forecast, inflation will measure 1.6% in May. It will be seen after the March measurement of clothing and footwear prices whether the cancellation of excise taxes on these items and the more favourable exchange rate on imports will combine to reduce prices on them.