PwC/AGEFI Monthly Barometer - April 2026

In collaboration with AGEFI Luxembourg

Economic Confidence Indicator

April 2026

The PwC Business Barometer registered a sharp decline in March, falling to – 6 from +8 in February. The reversal points to a renewed deterioration in business confidence as tensions in the Middle East continue to weigh on sentiment, despite recent signals of de-escalation.

This weakening in confidence is supported by a declining consumer sentiment. BCL confirmed that the consumer confidence indicator fell drastically, reflecting growing concerns about the cost of living. Inflation almost doubled in March, reaching 2.4% according to STATEC, placing the Grand Duchy among the economies with the sharpest inflationary upticks. The acceleration has been largely driven by the Middle East conflict, with the energy sector particularly exposed. Brent crude oil price surged to almost $120 per barrel, the highest level since 2022, pushing diesel and petrol prices up by over 20% and 10%, respectively. Prices later eased closer to $90 per barrel following a two-week ceasefire, but uncertainty remains elevated, pointing to a more fragile macroeconomic environment. These pressures are increasingly filtering through into domestic activity; even before the recent tensions, Luxembourg’s economy had entered a more delicate phase with GDP growing by just 0.6% at the end of 2025, well below historical norms. Should the conflict persist and energy prices remain under pressure, annual inflation could exceed STATEC’s current expectations of 2.5%, increasing the likelihood of earlier wage indexation in Q2 2026 and further weighing on domestic demand.

Across the eurozone, economic momentum continues to weaken, with PMI indicators pointing to the slowest growth pace in nine months as of March. The composite index edged closer to the contraction territory, reflecting stagnation in the services sector alongside persistent weakness in industrial production. This slowdown is occurring while increasingly uneven economic performance across member states is being observed. Spain emerged as the fastest-growing economy in March despite inflation reaching 3.3%. In contrast, Germany, the bloc’s largest economy, continued to expand towards the end of Q1 2026, but growth slowed to its weakest pace so far this year, with inflation at 2.8%. Meanwhile, both France and Italy slipped into contraction, recording inflation rates of 1.9% and 1.5%, respectively. At the same time, inflation across the bloc rose to 2.5% in March, moving above the ECB’s target and signalling early spillovers from higher energy costs linked to the geopolitical backdrop. While market expectations around potential rate hike has intensified, the policy outlook remains uncertain given the volatile growth environment.

In the US, inflationary pressures remain persistent, with headline inflation rising to 3.4% in March and projected to rise towards 4% by the end of the year, driven in part by higher energy and logistics costs linked to the situation in the Middle East. This was quickly reflected in global financial markets, where a sharp deterioration in risk sentiment triggered a broad-based sell off as investors repriced geopolitical risk and potential oil supply disruptions. The subsequent announcement of a temporary ceasefire provided a short-lived relief, prompting a rebound in the S&P 500. However, the recovery has remained tentative amid lingering uncertainty, with ongoing concerns over potential renewed disruption weighing on sentiment. Against this backdrop, the IMF has signalled plans to downgrade its global growth forecasts, warning of  lasting economic damage even in the most optimistic scenario. Whether this marks a turning point in the current cycle remains an open question.