PwC Luxembourg Monthly Barometer

In collaboration with AGEFI Luxembourg

Economic Confidence Indicator

July 2017

An improvement in morale among Luxembourg manufacturers has led our barometer to gain six points, while eurozone analysts and investors are increasingly confident.
In Luxembourg, GDP grew by 0.1% in the first quarter of 2017 (+3.3% year on year). However, in early 2017 growth in salaried employment partially slowed down and stabilised at 3.3% over the past 12 months. The slowdown can be mainly attributed to financial activity, particularly in the banking sector, which was down 7.3% in the last quarter. Nevertheless, business was buoyant for the rest of the service industry that grew 2.2% in added value,  driven primarily by the ITC, trade and corporate services sectors. Investment, too, has continued to recover over the past year and was up 2.3% in the second quarter of 2017. Loans to non-financial companies have also increased to reach €103.8 billion in the first quarter of 2017, up 7.5% from 2016.
In the eurozone, the ZEW index rose from 35.5 to 37.7 in June while the European Commission's business and consumer survey rose from 109.2 to 111.1. This widespread optimism accounts for the bullish euro, which is now trading at $1.14 to the Euro. The Eurozone growth rate was 0.6% in the first quarter of 2017 (compared to 0.5% in the previous quarter), resulting in a growth rate of 1.9% year on year. Nevertheless, unemployment was still at 9.3% in May, even though analysts had been hoping for a further decrease. The purchasing managers’ index (PMI) built on its recent momentum to reach 57.4, the highest it has been for six years. All sectors taken into account, the composite PMI has admittedly decreased to 55.7 (mainly due to the services sector), but its level is still in line with a quarterly growth of 0.6% or 0.7%. Producer prices in the eurozone have edged back: they were down 0.4% in May, particularly as a result of the decrease in oil and metal prices; however, they are still up 3.3% year on year. On a final positive note, the underlying consumer price index (CPI) rose by 1.1%, thus exceeding recent forecasts of 1.0%.

PwC Luxembourg's Monthly Barometer was created in cooperation with AGEFI Luxembourg as a simple and practical tool designed to provide a monthly snapshot of the economic climate in Luxembourg.

The barometer combines the results of Statec's short-term indicator on industrial output in Luxembourg with data published by ZEW, a German research institute, on the economic perceptions of analysts and investors regarding the euro area.

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