PwC/AGEFI Monthly Barometer - November 2023

The Monthly PwC Business Barometer

Economic Confidence indicator in collaboration with AGEFI Luxembourg

PwC/AGEFI Monthly Barometer - November 2023
Unemployment rises as economic activity weakens

Key Takeaways

  • The PwC Business Barometer reached -12 in November, down from -11 the previous month.
  • Apart from the transport sector, overall economic activity in Luxembourg experienced a decline in October. The slowdown in business activities had a direct impact on the unemployment rate, which rose to 5.5%.
  • Unemployment levels have also risen in the whole Euro Area, driven by a slowdown in the manufacturing and service sectors.
  • After the peak reached in mid-October due to the Israel-Hamas conflict, the price of Brent crude oil dropped gradually to pre-conflict levels, temporarily easing fears of a rebound in inflation.
In collaboration with AGEFI Luxembourg

Economic Confidence Indicator

November 2023

The economic barometer shows no signs of halting its decline, plummeting to -12 by the end of October. Although inflation has moderated, business activities have simultaneously softened.

The Luxembourgish economy experienced a modest contraction primarily attributed to the underperformance of the financial industry. While the transport sector exhibited signs of recovery, several other sectors faced stagnation, falling behind the broader economic conditions in the Euro Area. This had a notable impact on the unemployment rate, which stood at 5.5% as of September 2023. Confidence indicators slumped, particularly in the construction sector, where an 8-point decline was observed. The real estate sector in Luxembourg recorded a 6.4% YoY decline in Q2, significantly influenced by skyrocketing financing costs. On a brighter note, efforts to combat inflation have yielded some temporary success, as the inflation rate decreased to 3.2% in October. The positive trend can be attributed to a slower increase in food prices as well as certain free social services (e.g., canteens in schools, day-care centers, public transportation).

A subdued economic climate also grappled across the rest of the Euro Area, marked by a decline in the PMI to 46.5, the lowest level in the last three years. This decline can be primarily attributed to the accelerated contraction in the service sector and a reduction in new business intakes. While the manufacturing sector experienced a slight improvement in its orders-backlogs situation, the downward pressure on productivity has led to an increase in the unemployment rate, which now stands at 6.5% for the overall population and at 14.0% among the youth. This gloomy economic outlook has had a ripple effect, resulting in a significant drop in consumer confidence, reaching a seven-month low. Even though inflation has cooled down, the intention to make major purchases remains low, and both the bank lending growth rate and loans to the private sector have seen a decrease.

At a global level, geopolitical uncertainty exerted pressure on energy prices pushing the Brent crude oil price over 92 USD in October, fueling concerns of a rebound in inflation. However, as the market expected that the main oil-exporting countries would not be drawn into the Israel-Hamas conflict, the price went down gradually, dropping below the pre-conflict level as of the end of the month. However, the Brent price remains higher than the levels recorded before the July production cut announcements.

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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