Cityscape in Luxembourg

Luxembourg GDP Q3 2021

Luxembourg: GDP growth eases in the third quarter

A detailed breakdown confirmed that GDP growth slowed to 5.3% year-on-year in the third quarter, down from the second quarter’s 12.6% increase. This marked the slowest pace of expansion since the fourth quarter of 2020 amid a less favorable base effect.

The softening of annual growth was driven by a broad-based easing of domestic demand. Household consumption growth cooled to 3.5% in the third quarter, down from the second quarter’s 22.9% expansion. Moreover, public consumption growth eased to 3.3% in the third quarter from 6.0% in Q2. Capital expenditure, meanwhile, contracted 4.3% in the third quarter, contrasting the 30.0% expansion logged in the second quarter.

On the external front, exports of goods and services increased 8.0% in Q3, down from the 13.5% expansion logged in the second quarter. Similarly, imports of goods and services eased from a 15.9% expansion in the second quarter to a 6.7% increase in the third quarter.

More positively, underlying momentum improved as the economy expanded 0.9% on a seasonally-adjusted quarter-on-quarter basis in Q3, after flatlining in the second quarter.

Tighter Covid-19 restrictions since 19 October—which will remain in place until at least 18 December—as well as the emergence of the Omicron variation will likely weigh on the economy in the fourth quarter of the year. Looking ahead, the pace of economic growth is forecast to ease next year compared to this year, although this will be largely due to a less favorable base effect. Domestic and foreign demand should strengthen next year and a stable labor market at home will provide further support to household consumption.

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