Iceland’s consumer purchasing power up for first time since crash

The purchasing power of the average Icelandic resident increased in June for the first time since significantly before the banking collapse in autumn 2008.

According to new Statistics Iceland figures the 12-month purchasing power of Icelanders in June this year was up. The figures mark a significant psychological turning point.

Consumer purchasing power measures the ratio between wages and prices, in other words: Can people’s wages buy them more or less this month than last, once price increases have been taken into account?

The increase in purchasing power this June can therefore be attributed both to wage increases and inflation stabilisation. Until now, the average wage was failing to keep up with price inflation.

The wage index increased by 2.2 percent since May and the big leap can largely be put down to some union-negotiated industry wide pay increases in the private and public sectors which came into force on 1st June.

The average purchasing power in June was 0.3 percent higher than the previous June but up 2.6 percent on this May – a clear illustration of how much of a squeeze has been put on people’s wages since early to mid 2008.

The last time the 12-month purchasing power index rose was in January 2008, reports. The index measured 120 points at its peak and the recent change in fortunes will not see it return to those levels. It currently stands at around 106.5 points, meaning a collapse of around 11 percent since the start of 2008.