Icelanders’ foreign spending eases domestic inflation pressure

Icelanders’ real card spending rose 1.4% in July from the same month last year, while spending abroad increased and domestic spending declined, according to an analysis by mbl.is based on Landsbanki data.

Spending abroad rose 8.5% at a fixed exchange rate, while domestic spending fell 0.9% in real terms year on year. Domestic card spending has declined every month since February except June.

An increasing share of Icelanders’ consumption is taking place abroad, reaching 26.5% in July, the highest level recorded so far. The Landsbanki analysis said this reflected growing use of foreign online shopping, as well as purchases made during travel.

The trend is notable because overseas travel by Icelanders has declined by 10% so far this year. July was the first month in 2026 to record an annual increase, with 1.8% more overseas trips than in July last year.

Domestic retailers are therefore facing considerable competition from foreign businesses, the analysis said. This may partly explain year-on-year price declines for clothing, shoes and household goods.

Foreign card spending in Iceland increased 3.9% in July after adjustment for exchange rates, even though the number of foreign visitors fell 3.1% from the same month last year. Spending per visitor therefore increased slightly at a fixed exchange rate.

The analysis said the latest figures showed that Icelanders’ consumption remained relatively strong, which was good news in the fight against inflation.

It said that consumption growth increasingly coming from abroad reduced pressure on prices in Iceland. However, the trend could weaken the exchange rate and create additional inflationary pressure. The exchange rate has remained strong, and no such effects had been observed so far, it said.