Luxembourg Foreign Direct Investment (EUR bn)

Foreign Direct Investment in Luxembourg

After contracting in Q4, year-on-year economic growth should have rebounded in Q1. In January–March, average consumer and business sentiment strengthened from Q4’s average. Receding inflation, as well as accelerating retail sales growth in January–February, suggest improving private spending in the quarter. That said, in January, industrial output contracted at the quickest pace since July 2020—during the Covid-19 pandemic—driven by lower output in energy-intensive sectors, such as steel, glass and electricity production. Moreover, the increase in interest rates started to dampen activity: Credit supply decreased by a third on an annual basis in February, while year-on-year job losses due to bankruptcies jumped by 60% in Q1. In Q2, economic growth should nonetheless continue to accelerate, driven by improving global demand for services.