Uncertainty remains high in Luxembourg and Europe, with PwC's business barometer dropping to zero in May after a similar performance in the previous month. Overall, the trend in 2013 resembles that of the previous year.
The recovery in Europe appears to be just out of reach, with the European Commission announcing a deeper recession than initially forecast: GDP in the euro area is to contract to -0.4% in 2013 before rebounding to +1.2% in 2014. Against this backdrop, the European Commission and the International Monetary Fund have called into question the austerity drive enforced in many EU countries, while the European Central Bank has lowered its base rate to 0.5% in an attempt to kick-start growth. Germany was the only economy showing strength, with an unemployment rate of 6.9%, compared to 12.1% in the euro area.
In Luxembourg the outlook has been pessimistic for more than 12 months. The government is now reckoning with between 1% and 2% of GDP growth in the coming years, far from the 4% highs observed previously. The financial sector and banks in particular are unable to provide the boost needed to return to high growth. In this context, the automatic exchange of depositor details from 2015 could provide an opportunity to prepare Luxembourg's financial centre for the future.
PwC Luxembourg's business 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.
The graph below shows trends in the barometer over the past six years.