PwC/AGEFI Monthly Barometer - February 2026

In collaboration with AGEFI Luxembourg

Economic Confidence Indicator

February 2026

The PwC Business Barometer slightly improved to +1 in January, up from -1 in December, signalling a tentative rebound in confidence at the start of the year. Sentiment remains cautious but shows early signs of stabilisation as easing price pressures and supportive policy measures begin to filter through.

In Luxembourg, energy products recorded a marked decline, driven primarily by a 10.5% fall in electricity prices compared with 2025. Petroleum products also continued their downward trend, despite the increase in the CO₂ tax in January. On an annual basis, prices for these products fell by 9.2% last month, representing a gross decline of 10.2% excluding the impact of the CO₂ tax. Taken together, these developments have helped to ease headline inflation, which slowed to 1.3% in January. Reflecting this trend, STATEC now forecasts inflation at 1.8% for 2026, signalling a meaningful moderation from the elevated levels observed in previous months. Under a high-inflation scenario, however, price growth could reach 2.5% in 2026, potentially triggering an earlier-than-expected wage indexation as early as the second quarter of the year. The probability of such a scenario has increased in light of recent measures aimed at strengthening Luxembourg’s economy and international competitiveness. These measures include a 20% tax credit for individuals investing in innovative start-ups and a reformed carried-interest regime to strengthen Luxembourg’s position as a hub for alternative investment managers. Moreover, labour market dynamics remain favourable. Employment growth accelerated in the third quarter of 2025 and is expected to maintain its momentum, with preliminary data pointing to quarterly growth of 0.5%. This continued strength in the labour market further increases the likelihood of STATEC’s high-inflation scenario materialising.

Inflation in the euro area also eased in January, falling to 1.7%. This moderation reflects slower growth in business activity, driven primarily by subdued demand rather than a pronounced economic downturn. The second consecutive month of deceleration signals a continued loss of momentum, with growth remaining well below its historical average. The labour market mirrored this trend, with employment broadly stagnating. Nonetheless, businesses reported their strongest growth expectations since May 2024, suggesting a degree of cautious optimism. Momentum remained uneven across the bloc, albeit broadly positive. Spain recorded the fastest expansion, followed by Germany and Italy. France, by contrast, experienced a contraction in private sector activity for the first time since October.

The global backdrop remains fragile despite encouraging signs on inflation. Price pressures are easing across major economies, but markets are increasingly shaped by currency movements and policy uncertainty rather than by growth momentum alone. The weakening of the U.S. dollar has become central to this shift, reflecting expectations of a more accommodative Federal Reserve and the uncertainty surrounding the transition from Jerome Powell to Kevin Warsh. As confidence in the dollar’s yield advantage softens, investors have rotated into gold, which has climbed above USD 5,500 per ounce, underlining demand for protection in an environment marked by geopolitical tension and monetary recalibration. At the same time, Japan’s surge in long-term bond yields, with 40-year rates rising above 4%, highlights mounting concerns over fiscal sustainability and adds volatility to global capital flows.