Economy & Politics

The economic upturn seems to be confirmed

Since last May, positive signs have emerged from many sectors of activity in Luxembourg. This favorable trend is confirmed by the economic surveys carried out by Statec in July-August.

Jean-Francois COLIN

Jean-Francois COLIN

Since last May, positive signs have emerged from many sectors of activity in Luxembourg. This positive trend is confirmed by the business surveys carried out by Statec in July-August.

Luxembourg should expect a sharp drop in its GDP (gross domestic product) during the second quarter of 2020. At issue: the activity restrictions decreed by the government in view of the health crisis. Conversely, the gradual lifting of restrictions in sectors such as trade, catering or air transport is likely to revitalize the country’s economy. So the Statec is already seeing “signs of recovery at the level of monthly data” in its economic bulletin, published on Tuesday.

And the National Institute of Statistics to point the industrial production, rise of + 5.7% in May compared to April. Without forgetting to stress that this recovery is obviously taking place from a very low level, the months of March and April having been the most impacted by the economic lockdown. This renewed dynamism must therefore “be assessed against an abnormally low level preceding this recovery”.

Even if the economy has experienced an impressive slowdown, for many weeks, Statec reveals that Luxembourg is certainly doing better than neighboring countries. The weight of the financial sector playing in its favor.

The level of retail business, sales volume fell 9.3% over the first five months of 2020 in Luxembourg compared to the same period in 2019. But not all types of trade have been affected in the same way. Thus, where stores specializing in equipment, cultural fields and leisure articles saw their sales decrease by 20%, generalist brands such as large surfaces posted an increase of around 6%. The limitation of border flows also weighed heavily on purchases of tobacco (-7.3%) and fuel (-16%).

Regarding the automotive industry, registrations of passenger cars are down 25% from January to July compared to last year. It is especially from March to May (-60% over one year on average!) That the phenomenon turned out to be the most significant. Logic in full closure of concessions. This drop was only 10% over one year in June and 15% in July.

A new phenomenon, 100% electric vehicles represent 4% of sales from January to July 2020, against 2% in 2019 and 1% in 2018.

In parallel, the evolution of employment remains dynamic in the Grand Duchy. For the month of July, the first data available show an increase in the number of people employed of around 2%, against 1.4% on average from March to June. “No wonder that, because high employment growth is necessarily required for unemployment to fall,” says Statec. Who adds that “a job in Luxembourg concerns all the inhabitants of the Greater Region and does not necessarily benefit an unemployed Luxembourg resident.” This shows “a slow recovery in the economy.”

Favorable scores compared to that of the euro zone, which shows an average regression of 2.9% over one year for the second quarter of 2020. In Luxembourg, the recovery comes mainly from business services and Horeca.

Finally Yes inflation (excluding energy) has remained relatively stable since the start of the covid-19 crisis, Statec expects an acceleration to 0.9% in 2020. Then to 1.3% in 2021 in Luxembourg. At the same time, the European Commission predicted in July that inflation in the euro area would accelerate by 0.3% in 2020 and by 1.1% in 2021.


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