GDP enters into technical recession in Q3

GDP fell at a slower rate of 0.1% on a seasonally adjusted quarter-on-quarter basis in the third quarter, bringing the economy into a technical recession following the 0.2% contraction logged in the second quarter. Q3's sequential reading marked the largest contraction since Q4 2022. On an annual basis, GDP declined 1.8% in Q3, compared to the previous quarter's 1.5% fall.

Household spending contracted 0.2% in Q3, marking the worst result since Q4 2022 (Q2: +0.9% s.a. qoq). Meanwhile, public consumption growth moderated to 1.2% in Q3 (Q2: +1.4% s.a. qoq). Fixed investment rebounded, growing 3.5% in Q3, contrasting the 5.8% decrease recorded in the prior quarter. Exports of goods and services growth sped up to 1.0% seasonally adjusted quarter on quarter in the third quarter, which marked the best reading since Q4 2021 (Q2: +0.4% s.a. qoq). In addition, imports of goods and services bounced back, growing 1.4% in Q3 (Q2: -0.7% s.a. qoq).

On the outlook for the economy, analysts at the EIU commented: “Growth in 2024 will be driven by slowing inflation, which will strengthen household spending; a loosening in monetary policy from the second half of the year; and a rebound in export growth. Financial services exports are the traditional driver of growth in Luxembourg, and this sector will remain dominant in 2024.”

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