26.07.2010 13:38
A number of important statistics are due to appear this week. The Capacent Gallup Consumer Sentiment Index for July will be published tomorrow. Consumer sentiment has continued to brighten, according to the June index, which rose by four points month-on-month to its post-crisis high of 61.2, clearly reflecting growing optimism among Icelanders. The past few months' upbeat sentiment has been focused primarily on expectations for the future, according to the Capacent Gallup index. It will be particularly interesting to see whether this optimism is beginning to show in attitudes towards the current situation. The Consumer Sentiment Index provides a quantitative indication of consumers' attitudes towards the economy and the labour market. The employment outlook has been rather more buoyant recently, possibly affecting consumers' current expectations.
Will inflation continue to subside?On Wednesday, Statistics Iceland (SI) will publish the consumer price index (CPI) for July. We project a month-on-month decline of 0.2%. If that forecast is borne out, inflation will drop from 5.7% to 5.3%, its lowest measurement since late 2007. In our forecast, sales exert strong downward pressure on the CPI, as is customary in July, and we assume that the index will fall temporarily by as much as 0.5% as a result. Furthermore, indicators imply that house prices are on the decline again after the uptick this spring, contributing 0.1% to the drop in the CPI according to our forecast. Offsetting this, however, are petrol prices, which have risen sharply since SI's June measurement. We project that fuel prices will raise the CPI by 0.2%. In addition, electricity prices rose somewhat at the beginning of July. Other major subcomponents will tend to rise modestly in July, according to our forecast.
Handsome merchandise account surplus year-to-date On Friday, SI will publish statistics on external trade in June. According to the preliminary figures that appeared earlier this month, the merchandise account surplus was positive by ISK 8.6 bn in June. Merchandise exports totalled nearly ISK 48 bn during the month, while imports were just over ISK 39.3 bn. If the preliminary numbers prove to be accurate, the merchandise trade surplus for the first half of the year will total ISK 63.5 bn, a much larger surplus than the ISK 39.3 bn recorded during the same period in 2009. We consider it likely that the merchandise account surplus will be over ISK 100 bn this year, as opposed to last year's surplus of ISK 90.3 bn. This year's surplus could range between 7% and 8% of GDP, as compared with last year's figure of 6%.