PwC/AGEFI Monthly Barometer - March 2026

In collaboration with AGEFI Luxembourg

Economic Confidence Indicator

March 2026

The PwC Business Barometer slightly continued its consecutive improvement to +8 in February, up from +1 in January, indicating a firmer recovery in confidence as the year progresses. Despite the confidence increase, the outlook remains cautious amid rising geopolitical tensions and an uncertain economic outlook.

Business confidence in Luxembourg has been supported by the consumer component, benefiting from the broader stabilisation of prices across the country. Inflation stood at 1.3% in February, largely reflecting a decline in energy prices, particularly following the earlier reduction in electricity tariffs. Despite the stabilisation, a reversal of the trend may emerge in the near term. The joint attack by Israel and the US on Iran, which began on 28 February, could exert renewed upward pressure on inflation. In the days following the start of the offensive, oil prices surpassed the $100 mark due to the partial closure of the Strait of Hormuz, through which roughly 20% of global oil supplies transit each day. Oil prices retreated on 9 March after a statement by President Trump indicating that the war was “very complete.” However, uncertainty remains elevated as strikes continue. Should the conflict persist, energy prices could rise again, generating significant inflationary pressures worldwide. Additional challenges to the economic outlook stem from developments in the labour market. Luxembourg’s unemployment rate rose to 6.3% in January, its highest level since 2021. Combined with a potential resurgence in inflation, this could weigh on private consumption and economic growth in the coming months. Nevertheless, despite the risks associated with the current geopolitical environment, Luxembourg’s reaffirmed AAA rating and stable outlook from Moody’s and S&P Global provide reassurance regarding the country’s overall economic resilience and fiscal strength.

Inflation in the Euro Area stood at 1.9% in February, slightly higher than the 1.7% recorded in January, but still below the 2% target. The increase was primarily driven by services, where prices rose by 3.4%. In contrast, energy prices declined by 3.4%, marking the sixth consecutive month of decreases in this category. However, inflationary pressures could intensify in the coming months if the conflict in Iran leads to higher energy prices, potentially pushing inflation in the economic bloc above the 2% target. February data also indicated the sharpest rise in input costs since April 2023, which could feed through to consumer prices in the months ahead. In this context, central banks across Europe have come under increasing market pressure to tighten monetary policy. Money markets are now pricing in the possibility of interest rate increases by the ECB before the end of the year.

In the US, even before the joint strike with Israel on Iran, the high cost of living and softening labour market pointed to an affordability crisis taking hold. The US economy lost jobs in February, and the unemployment rate edged up to 4.4%. The inflation figure for February came out at 2.4%, in line with expectations, but still higher than the 2% target. As oil prices directly affect consumer costs, affordability concerns are likely to worsen rapidly. Furthermore, the job market hasn’t shown significant signs of slowdown, meaning that Fed officials might not be sufficiently concerned to cut interest rates in the coming meetings. This is further supported by a fresh 10% global tariff imposed by Trump’s administration, which came as a retaliation measure following the decision of the Supreme Court to strike down earlier tariffs.