Luxembourg: Economy bounces back in the third quarter
The economy rebounded in the third quarter, with GDP expanding 0.5% year-on-year, contrasting the 7.8% contraction recorded in the second quarter.
The upturn reflected the easing of Covid-19 containment measures, which drove a notable improvement in domestic demand. Fixed investment bounced back in Q3, growing 7.8% on an annual basis, contrasting the previous quarter’s 20.3% decline. Moreover, household consumption fell at a less pronounced rate of 1.6% in Q3 (Q2: -19.6% yoy). Meanwhile, government expenditure growth lost pace, ticking down to 6.3% in Q3 from 6.4% in Q2.
On the external front, exports of goods and services rebounded in Q3, growing 1.2% (Q2: -1.7% yoy) as foreign demand picked up. In addition, imports of goods and services grew 2.2% in Q3, contrasting the previous quarter’s 2.9% contraction.
On a seasonally-adjusted quarter-on-quarter basis, economic activity rebounded, with GDP expanding 9.8% in Q3, contrasting the previous quarter’s 7.4% fall.
After this year’s contraction due to Covid-19 containment measures, the economy is set to return to growth in 2021. Household spending should rebound amid a stabilizing labor market, while capital spending is set to bounce back. Reviving global demand should boost the external sector. A continued rise in Covid-19 cases is a downside risk, however.