PwC/AGEFI Monthly Barometer - January 2021

In collaboration with AGEFI Luxembourg

Economic Confidence Indicator

January 2021

Most of the observed sentiment indicators recorded an increase this month, leading to a 16-point increase in our barometer - which now stands at a relatively neutral level of -3. That being said, households and businesses remain sceptical for the beginning of 2021.

Luxembourg’s recently published Q3 GDP growth figures attest to the country’s economic resilience throughout the initial COVID crisis in H1 2020. GDP experienced an almost 10% QoQ growth during Q3, indicating a steep recovery in the Luxembourgish economy - bolstered by the manufacturing, retail, construction, financial and business services sectors. Although this percentage growth was lower in comparison to the overall Euro Area, this is justified by the relatively modest initial impact of the pandemic on Luxembourg relative to other Eurozone economies. However, the health measures implemented in December by Luxembourg and its neighboring countries (which are Luxembourg’s largest trading partners), are likely to negatively affect growth in end-2020 and early 2021.

The Q3 rebound was equally pronounced in Europe overall, with GDP recording an 11.5% QoQ growth (12.5% for the Euro Area). Despite these positive results, data collected at the end of the year indicates a less favourable landscape for the beginning of 2021, given the health measures implemented by most member countries. Once again, the services sector was the most negatively impacted in December, while manufacturing saw an accelerated increase of activity. The private sector in the Eurozone experienced a contraction in December for the second consecutive month, albeit to a lesser extent than was observed in November. The service sector experienced a more dramatic decline than initially estimated, due to the increased adoption of social distancing measures. Job losses continued in line with the overall trend observed since March, as a result of decreasing workloads. On the other hand, in an effort to alleviate the impact of the COVID-19 pandemic, the European Central Bank further increased monetary stimulus to prop up the European economy.

In early January 2021, the World Bank published the latest issue of Global Economic Prospects. According to their forecasts, global economic output is expected to increase by 4% in 2021, well below the pre-pandemic forecasts. In their view, the amount of debt accumulated between the GFC and today, combined with the negative economic effects of the pandemic, has increased uncertainty - with many economies heavily exposed to financial market risk. Finally, the authors recognized a few key pillars on which policymakers and governments should base their pandemic-relief efforts in order to stimulate economic recovery: global cooperation, strong reforms, containing the spread of the virus and avoiding debt defaults.

  • 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

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