Iceland’s economy expanded by 1.2% year-on-year in Q3 2025, rebounding from a revised 0.2% contraction in the previous three-month period. The main contributor to growth was household final consumption, which grew 4.2%, mainly on the back of increased spending on service-related goods. At the same time, gross fixed capital formation and government consumption rose 2.2% and 0.9%, respectively. Meanwhile, net external demand had an estimated negative contribution of 4.5% to growth, reflecting a widening trade deficit with exports up 2.6% and imports climbing 13.5%. On a seasonally adjusted quarterly basis, the GDP shrank by 0.2% in Q3, after a revised 0.4% decline in the prior period.