PwC/AGEFI Monthly Barometer - April 2021

In collaboration with AGEFI Luxembourg

Economic Confidence Indicator

April 2021

Our barometer records a significant increase of 17 points this month, reaching the level of +10. With renewed optimism regarding the trajectory of the economy, as well as a strong belief that the rapid progression of vaccinations will lead to a quick return to normality, our barometer (under the revised methodology) reaches for the first time a positive figure since the outbreak of the Covid-19 crisis. 

With Q4 2020 preliminary estimates available, Luxembourg is expected to record a yearly GDP contraction of 1.3%, the sharpest drop since the Global Financial Crisis. Nevertheless, once the huge impact of Covid-19 is taken into account this figure can be seen as quite a healthy performance. Growth in industries, such as ICT and business support activities, as well as a contained fall in transportation and manufacturing sectors, enhanced the resilience of the country against the crisis.

Overall sentiment for the country is on an upward trend, with most of the indicators monitored recording an increase during March. Consumer confidence has recorded the highest value since the outbreak of the Covid-19 pandemic, given a) the slow but steady progress of the vaccination campaign and b) the gradual lifting of restrictions, especially in the hospitality sector. Construction and industrial sentiment also saw an increase, signaling a favorable outlook for the coming weeks.

Manufacturing output in the Eurozone recorded a significant increase during March (manufacturing PMI at 62.5 for March), boosted by an increasing global demand which translated into a sharp increase in exports. As a result, hiring of new personnel increased and order books stood at optimistic levels the following weeks. On the other hand, the service sector recorded a decline in output, although less severe compared to previous figures. The gradual ease of confinement restrictions and spillover effects from the strong performance of the manufacturing sector decelerated the decline. Nevertheless, the discrepancy between the manufacturing and service sectors will continue to persist for the coming months, as restrictions on social activity continue to be enforced.

In its latest World Economic Outlook, the IMF is now projecting a stronger recovery for the global economy compared with its January forecast, with growth projected to be 6 percent in 2021 and 4.4 percent in 2022 after an estimated historic contraction of -3.3 percent in 2020. Additional fiscal support in large economies, particularly the United States, has significantly improved the outlook. The unprecedented drop in economic activity in 2020 could have been more detrimental if governments and central banks had not provided policy support, particularly 16 trillion dollars in fiscal packages. Second, the IMF points out that the overall decline in GDP was less severe than expected, as many activities rallied in the second half of 2020. Third, they recognise that the effects of the pandemic have been asymmetric, affecting more economies dependent on tourism and unskilled workers, while simultaneously increasing the wealth gap globally. Finally, they mention that, even though GDP growth estimates are more optimistic for 2021, overall uncertainty will continue to play a key role in the global outlook, calling for coordinated policy actions around unemployment, healthcare and green infrastructure.

  • The monthly PwC barometer, in collaboration with AGEFI Luxembourg, is an economic confidence indicator which is intended to be a simple and pragmatic tool aimed at capturing the economic atmosphere of the Grand Duchy each month.
  • The indicator is based on a number of sentiment indices published monthly by Eurostat and Sentix, which are based on surveys (businesses, consumers or investors/analysts).
  • The indicators used are: consumer confidence (EA for euro area and LUX for Luxembourg), industrial confidence (EA and LUX), construction confidence (EA and LUX), financial confidence (EA), retail confidence (EA), services confidence (EA) and the Sentix Index (EA).

Contact us

Dariush Yazdani

Dariush Yazdani

Market Research Centre Partner, PwC Luxembourg

Tel: +352 49 48 48 2191

Follow us