Highest inflation in eight years
Inflation in Iceland last topped five percent in June 2012, when it was 5.4 percent and reducing quickly following the major spike during the financial crisis. It had hit nearly 19 percent in early 2009.
House prices, which jumped 2.5 percent, are the biggest factor in the current inflationary picture, driving the consumer price index up by 0.4 percent. The second-biggest factor is drinks, which have increased in price by 1.1 percent—largely down to the increasing cost of milk.
Inflation calculations have changed and Hagstofa Íslands (Statistics Iceland) now updates its measurement methods annually to reflect changing trends in household consumption. This is done every year by updating how private consumption is weighted, though the methodology remains the same. Hagstofa Íslands tries to track long-term consumption trends by compiling data on a three-yearly basis.
The agency’s website notes that consumption patterns have changed significantly over the past one year, specifically in response to the pandemic. Spending on overseas travel is down, as well as spending on specific services and events (due to cancellation or closure). The agency therefore felt it necessary to take account of these changes in its latest inflation calculation.