PwC/AGEFI Monthly Barometer - December 2023
The Monthly PwC Business Barometer
Economic Confidence indicator in collaboration with AGEFI Luxembourg
Business challenges persist amidst confidence fluctuations
Key Takeaways
- The PwC Business Barometer reached -11 as of the end of November, up from -12 the previous month.
- Despite a modest improvement in overall confidence in Luxembourg, challenges persist, particularly in the construction sector. The real estate market is grappling with reduced demand, mainly due to rising interest rates.
- In the Euro Area, the economic downturn extended into the fourth quarter, marked by sustained declines in new business and backlogs of work.
- The OECD has warned there may be a global slowdown in 2024 compared to 2023, citing tighter financial conditions, weak trade growth, and declining business and consumer confidence.
In collaboration with AGEFI Luxembourg
Economic Confidence Indicator
December 2023
The economic barometer stood at -11 by the end of November, reverting to September levels. Despite the rebound, confidence remains low in both Luxembourg and the broader Euro Area.
In the Grand Duchy, despite a slight uptick in overall confidence, businesses face persistent challenges, particularly in the construction sector. The industry's confidence indicator hit -8 in November, reflecting ongoing uncertainties. The real estate market is grappling with decreased demand, primarily due to surging interest rates. This has led to a decline in property transactions, as highlighted in the latest European Commission bank lending survey, indicating a continued drop in new mortgages throughout Q3. Resident households saw a 1% quarter-on-quarter reduction in newly granted mortgages, marking the fifth consecutive quarter of significant contractions (-44% year-on-year). Data also shows a 1% year-on-year contraction in total outstanding mortgages, highlighting enduring challenges in the real estate and construction sectors.
In the Euro Area, the economic downturn entered its sixth month, extending into the fourth quarter. The labour market experienced its first decline in employment since January 2021, influenced by weakened demand. Despite a slight improvement, business confidence remained subdued compared to historical standards, and inflationary pressures continued to intensify. Although the latest PMI reading of 47.6 is an improvement from October's 35-month low of 46.5, it still indicates a substantial deterioration in economic conditions.
The OECD has warned of a slowdown in global GDP growth due to tighter financial conditions, weak trade growth, and declining business and consumer confidence. In its latest economic outlook, the organization foresees a soft landing for advanced economies, with global growth easing to 2.7% in 2024 (from 2.9% in 2023) before rising to 3% in 2025. The Euro Area is expected to see 0.5% year-on-year GDP growth from Q4 2022 to Q4 2023, with GDP expanding by 0.6% in 2023, 0.9% in 2024, and 1.5% in 2025. While consumption is expected to increase, the full impact of tight monetary policy in the Euro Area is yet to materialise, potentially hindering economic activity
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
Partner, Global AWM Market Research Centre Leader, PwC Luxembourg
Tel: +352 49 48 48 2191
