PwC/AGEFI Monthly Barometer - December 2022

The Monthly PwC Business Barometer

Economic Confidence indicator in collaboration with AGEFI Luxembourg

PwC/AGEFI Monthly Barometer - December 2022
Confidence under pressure despite the new fiscal measures

Key Takeaways

  • The PwC Business Barometer increased by 11 points last month, reaching a level of -13 as of the end of November.
  • Both household purchasing power and business confidence in the Grand Duchy are benefitting from recent fiscal measures.
  • At the eurozone level, the manufacturing sector is still leading the economic downturn, which appears to be more moderate in comparison to past months.
  • According to the forecast provided by Goldman Sachs, the world economy is set to grow 1.8% during 2023.
In collaboration with AGEFI Luxembourg

Economic Confidence Indicator

December 2022

The PwC economic barometer increased by 11 points during the month of November, reaching a level of -13 by the end of the period – the most significant rebound since June 2020. The economic measures announced in Luxembourg and the inflation slowdown contributed to a recovery in consumer confidence.

Even though the economic measures announced last year in Luxembourg are expected to significantly weigh on public finances, they are set to positively impact the country’s GDP and employment in 2023. The measures will cost EUR 1.7bn to the Grand Duchy – EUR 700mn in 2022 and EUR 1bn in 2023 – and will include an energy tax credit, a temporary 1% cut in the VAT rate, and an electricity price cap for households; fiscal measures will lead to an increase in the disposable income of households by 1.5% over the coming months and will boost the domestic demand leading to an expected real GDP growth of 0.5% and 1.5% respectively at the end of 2022 and 2023. However, the real economic impact of such measures will depend on the actual trend in the gas prices, as a rise in energy costs might place a heavier burden on the public budget. For now though, business’ and consumers’ confidence in the country are currently benefitting from the economic measures described above and are expected to continue to do so in the short term. Confidence on the financial sector is being boosted by a forecasted increase in investment funds assets figure for Q4 - led by the upswing in the stock market observed from mid October.

Although the relatively good performance of the financial market has had a positive impact on all sectors, the business activity at the euro area level recorded a decline for the fifth month in a row as of end November. With that being said, the downturn intensity appears to be more moderate this month than that of previous months, and the recorded growth rate of firms’ costs is this slowest its been since Q4 2021. The manufacturing sector still leads this economic decline, recording the sixth consecutive month of plunging output. Similar results are observed in the services sector, with the latter recording the fourth consecutive drop in output as of end November. As a consequence of the overall slowdown in business, the employment rate recorded its lowest monthly growth since the end of Q1 2021, while a weaker aggregate demand led to a reduction of supply chain delays.

On the global level, the economic growth has generally slowed down during 2022 as a consequence of the war in Ukraine, the inflationary environment, and China’s Covid restrictions -  which has had a negative impact on the global supply chain. Goldman Sachs estimates that, for 2023, the world economy will only record a 1.8% growth, principally led by a resilient US economy and an expected reopening of China. The US, in fact, should be able to avoid the recession as core inflation is set to decelerate in 2023 – with a decrease from the initial forecast of 5% to 3%. In addition, the Fed is expected to raise interest rates again, with rates expected to reach a peak of 5-5.25%, remaining steady for most of 2023. 

About the PwC Business Barometer

  • The monthly PwC barometer, in collaboration with AGEFI Luxembourg, is an economic confidence indicator that 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

Partner, Global AWM Market Research Centre Leader, PwC Luxembourg

Tel: +352 49 48 48 2191

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