PwC/AGEFI Monthly Barometer - November 2025

In collaboration with AGEFI Luxembourg

Economic Confidence Indicator

November 2025

The PwC Business Barometer recovers to -3 in October, up from -6 in September. Confidence from trade agreements contrasts with rising geopolitical tensions and economic uncertainty.

In October, consumer confidence in Luxembourg showed signs of recovery. Following the 2026 budget presentation of Finance Minister Gilles Roth, households can expect lower prices, more stability, and improved welfare. Confidence rose as energy spending is forecast to decline in 2026. In addition, planned tax reforms and prudent budgeting, combined with targeted investments to ease the housing crisis, are laying the foundation for resilience. Expectations of wage indexation in early 2026, which will strengthen purchasing power, also support current sentiment. Challenges remain: STATEC downgraded the Grand Duchy’s GDP growth forecast to 1% at the end of 2025 and 2% in 2026. Labour market fatigue is among the key reasons for weaker performance. Job creation projections expect to hardly exceed 2% in the medium term. As per latest data from STATEC, the unemployment rate increased to 6.1% in the month of September, from 5.9% in August, signalling a deterioration of the labour market. Global trade uncertainty, especially with the US, continues to weigh on Luxembourg’s outlook. Exports to the US fell by 2% in the first eight months of 2025. Metals and related products drove the decline, accounting for about 40% of total exports in recent years. Luxembourg’s direct exposure to US trade shocks is limited, but strong ties with EU partners create indirect risks, as they are more affected by worsening trade conditions.

At EU level, consumer confidence is supported by stable inflation and improved growth data. Inflation eased to 2.1% in October from 2.2% in September, continuing its downward trend. This stability has helped reinforce optimism among households and businesses. Growth reached its strongest level since May 2023, driven by improved private sector activity. Spain and Germany led the improvement, showcasing respectively a PMI of 56.0 and 53.8. Italy and Ireland also expanded. France, however, underperformed (47.7 PMI). Political and economic challenges, weakness in the construction sector, and low demand for services weigh on its outlook. Moreover, France’s debt burden, projected to reach 125% of GDP by 2035, adds further concern about fiscal sustainability.

Globally, growth remains slow but resilient, projected at around 3% in 2026, according to IMF forecasts. Although this pace is still below pre-pandemic averages, it demonstrates the global economy’s ability to withstand recent shocks, including energy price volatility and geopolitical tensions. Key uncertainty drivers have eased, helping to reduce consumer concerns and stabilize sentiment in major markets. One notable improvement is the temporary calm in US-China trade relations, following the recent agreement that paused tariff escalations. While this has provided short-term relief for global supply chains, analysts remain cautious about the durability of the deal, given underlying structural issues and political sensitivities. In the United States, the longest government shutdown in history has finally ended, after significantly disrupting public sector operations and eroding confidence in institutions. The resolution came through a compromise that funds the government only until January 2026, leaving the possibility of renewed fiscal tensions early next year.