PwC/AGEFI Monthly Barometer - June 2026

In collaboration with AGEFI Luxembourg

Economic Confidence Indicator

June 2026

The PwC Business Barometer rose to -17 in June, up from -20 last month, signalling a modest improvement in business sentiment while remaining firmly negative.

Energy prices in Luxembourg declined in May, falling by 2.5% MoM, largely driven by lower heating oil prices. Diesel prices dropped by 7.1%, while fuel declined by 1.4%, as Brent crude oil moderated towards the USD 90–100 range following a proposed ceasefire between US and Iran.This contributed to a sharp moderation in annual inflation, falling to 2.3% from 3.1% in April. However, this easing follows a period of elevated inflation that triggered wage indexation on 1 June, supporting household incomes but adding to cost pressures for businesses. While lower energy prices point to a partial easing in stagflationary pressures, the broader transmission to the economy remains limited. Consumer confidence remains weak at –14, as households’ perception of their past financial situation deteriorated significantly. Despite recent declines, prices remain elevated relative to last year, leaving households exposed to persistent cost-of-living pressures. The broader macroeconomic backdrop also remains fragile. According to STATEC, Luxembourg’s GDP stagnated in Q1 2026, with flat quarterly growth, as external trade offset gains in investment and public spending, alongside continued sectoral divergence across the economy.

This fragile stabilisation is also reflected at the eurozone level, where the easing in inflation pressures continues to be offset by weak growth dynamics. The eurozone economy contracted by 0.2% in Q1 2026, as the composite PMI slipped further to 48.5 in May from 48.8, marking its lowest level in 18 months and a second consecutive month of contraction. At the same time, annual inflation edged up to 3.2% in May, the highest level in three years, while core inflation stood at 2.5%, reinforcing expectations of an ECB rate hike. The bloc’s largest economies recorded only marginal growth in Q1 2026, with Spain expanding by 0.6%, Germany and Italy by 0.3%, while France contracted by –0.1%, underscoring the uneven and fragile recovery across the region. The OECD now projects only modest growth for the eurozone, reflecting continued exposure to elevated energy prices and persistent inflationary pressures, with GDP expected to grow by 0.8% in 2026 if the conflict eases, and rising to 1.2% in 2027.

Amid this uneven global backdrop, US continues to show relative resilience, although underlying pressures remain. GDP grew by 1.6% in Q1 2026, supported by exports, consumer demand and government spending, even as momentum in private domestic activity softened. Despite headline inflation remaining elevated, labour market dynamics present a nuanced picture: job openings rose by 731,000 in April to 7.62 million, the highest level in nearly two years, pointing to a resilient labour demand. While this supports household income and consumption, it also signals a tighter labour market, reducing the urgency for near-term Fed rate cuts and pointing towards a prolonged period of policy stability. At the same time, geopolitical tensions continue to shape market dynamics. Gold prices declined to around USD 4,300 per ounce, a two-month low, reflecting expectations of tighter monetary policy, while renewed tensions between Israel and Iran added to inflationary pressures. Against this backdrop, the OECD warns that global growth could slow to 2.1% if tensions persist, while inflation is expected to remain elevated at around 4.0% this year.