The rise in PwC’s barometer over the past months has essentially been driven by strong investor morale in Europe, but now Luxembourg investors are also climbing on the bandwagon. As a result, PwC’s barometer has jumped by 6 points in January, reaching +29.
Growth is returning to Luxembourg: according to Statec, GDP growth should range between 2.7% and 3% in 2014, up from between 2% and 2.5% at the end of 2013. Government revenue should rise in 2014, but is expected to fall the following year due to tax shortfalls from online retail. According to Eurostat data, Luxembourg’s industrial production increased by 5.3% in November 2013, reaching a 6-month high (compared to an average decline of 3.1% from June to October 2013). The EIB’s bid to support SMEs of the Benelux countries through credit facilities should also bolster this positive trend.
The mood is also improving in Europe, albeit at a slower pace than in Luxembourg. Although Spain has exited the euro area’s support programme, the drop in the country’s unemployment rate has been short-lived, with unemployment on the rise after two consecutive quarters of decline. The European Central Bank has, for its part, maintained the status quo on its base rate and has rejected any fears of deflation. Finally, although government debt in the euro area has increased year-on-year (standing at 90% of GDP in Q3 2012), this ratio has dropped in the last quarter (from 93.4% to 92.7% of GDP at the end of Q3 2013).
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.
The graph below shows trends in the barometer over the past six years.