---
title: "Luxembourg's economy holds steady; 0.4% QoQ GDP rise"
sdDatePublished: "2026-08-28T14:08:00Z"
source: "https://statistiques.public.lu/dam-assets/catalogue-publications/conjoncture-flash-en/2026/flash-08-26-en.pdf"
topics:
  - name: "economic trends and indicators"
    identifier: "medtop:20000346"
  - name: "gross domestic product"
    identifier: "medtop:20000359"
  - name: "consumer confidence"
    identifier: "medtop:20000352"
  - name: "business information"
    identifier: "medtop:20000170"
  - name: "international trade"
    identifier: "medtop:20000373"
locations:
  - "Germany"
  - "Luxembourg"
  - "United States"
  - "France"
  - "Iran"
  - "Ireland"
  - "Spain"
---


Luxembourg's economy holds steady; 0.4% QoQ GDP rise

Conjoncture Flash August 2026: Despite the turbulent environment, economic activity holds steady

 Conjoncture Flash August 2026
MONTHLY PUBLICATION ON THE STATE OF THE LUXEMBOURG’S ECONOMY – AUGUST 2026
DESPITE THE TURBULENT ENVIRONMENT, ECONOMIC
ACTIVITY HOLDS STEADY
The turbulence linked to the international environment has been clearly reflected in business surveys over the past
few months, both in the eurozone and in Luxembourg. Economic activity in the eurozone, however, held up well in
the 2nd quarter and has shown moderate but steady growth over the past few quarters.
Economic activity in the eurozone held up well in the 2nd quarter of
2026, with GDP growing by 0.4% quarter-over-quarter. This result
was better than expected (the initial consensus among analysts had
projected a 0.2% increase), given the negative signals posed by the
energy inflation shock linked to the conflict in the Middle East and
the deterioration in business sentiment surveys observed during the
spring. Economic activity rebounded in France, rising 0.2% (after a
0.1% decline in Q1), supported by a rebound in aerospace exports
and capital goods. A similar increase was recorded in Germany1 ,
driven there as well primarily by exports and, to a lesser extent, by
household consumption, while investment declined. Spain (+0.7%)
also maintained a pace of growth similar to the average observed
over the previous four quarters, remaining a major contributor to
overall growth. Ireland, whose GDP growth is particularly volatile,
has had a significant impact on the eurozone’s GDP figures in recent
quarters. Unlike in the 1st quarter, when it weighed heavily on
eurozone growth2 , it is making a positive contribution this time
around. Excluding Ireland, the change in eurozone GDP stands at
0.3% quarter-over-quarter, a result identical to that of the previous
three quarters. Beyond the volatility linked to Ireland’s performance,
the underlying trend in the eurozone is therefore one of growth that
is certainly moderate (with notable differences across countries) but
relatively steady.
This picture contrasts with the significant fluctuations observed in
business and consumer sentiment surveys over the same period.
The views of economic actors have clearly reflected the upheavals of
a destabilized international environment, marked in recent months
by the consequences of the war in Iran (and in particular rising
energy prices). Despite a brief lull in June and July following the
signing of a memorandum of understanding between the United
States and Iran, tensions between the two parties have since
escalated significantly. The number of ships transiting the Strait of
Hormuz, which had temporarily rebounded, has fallen back to its
lowest level, and there are currently no concrete signs of a
breakthrough on the horizon.
━
And in Luxembourg?
In Luxembourg, business3 and consumer confidence indicators—
which, like those in the eurozone, had slumped during the spring—
are recovering slightly as summer begins, but it would be risky to bet
on the start of a turnaround.

1 Germany’s first-quarter 2026 growth figure was also significantly revised upward to +0.4%
(compared with just +0.1% in the previous estimate).
2 Ireland’s GDP had fallen by 7.0% quarter-over-quarter. Excluding Ireland, the eurozone
would have posted a 0.3% increase in the 1st quarter (rather than stagnation).
CONFIDENCE INDICATORS

Sources: S&P Global PMI, STATEC
Luxembourg’s GDP figures for the 2nd quarter are not yet available,
but various trends are emerging from the available short-term
indicators. There are some fairly positive signs regarding household
consumption, with retail sales volume up compared to the 1st quarter
(excluding gas stations and mail-order sales) and a sharp rebound in
new car registrations (following near-stagnation in Q1). Net issuance
in UCIs remained relatively high, against the backdrop of a stock
market that continues to perform strongly (see below). Industrial
production rose for the 3rd consecutive month in May, and
construction output continued to follow the slight upward trend that
began in late 2025. In the non-financial services sector, production
figures (turnover by volume), available for April and May, are mixed:
they show a somewhat more positive trend than in the 1st quarter in
the transportation and warehousing, hospitality, and real estate
sectors, but are down in the information and communication
services and business services sectors.
3 The business confidence indicator combines the results of several questions from
business surveys conducted among companies in the manufacturing, construction, retail
trade, and other non-financial services sectors. Financial sector participants are not covered
by a dedicated business survey.
-1.5
-1.0
-0.5
0.0
0.5
1.0
46
48
50
52
54
56
Jan-22
Jan-23
Jan-24
Jan-25
Jan-26
In points
In points
Eurozone - Composite PMI (left scale)
Luxembourg - Business Confidence Index (right scale)

 Conjoncture Flash August 2026
Environment
PRECIPITATION IN LUXEMBOURG

Source: Agrarmeteorologie Luxemburg
Dry conditions
Much of Europe experienced several heat waves from May through
August, a phenomenon from which Luxembourg was not spared.
Daily temperatures recorded in Luxembourg City were particularly
high in June (20.1 °C, nearly 3 degrees above the normal temperature
for that month—1995–2025 average) and July (21.3 °C, 2.5 degrees
above the seasonal norm). This year, the high temperatures were
accompanied by particularly low precipitation: over the first seven
months of the year, precipitation was more than 30% below normal
levels (-60% from April through July).
The impact of this drought on economic activity is difficult to assess
at this time. In the business survey of construction professionals, the
July 2026 survey (the most recent one) shows that a slightly higher
number of companies cited weather conditions as a factor limiting
their activity (about 10% of companies, compared with only 5% in July
2025). Furthermore, low water levels in rivers and streams are likely
to disrupt the supply chains of certain industries, particularly for
materials transported or shipped via the Moselle River. Finally, the
anticipated decline in yields for certain agricultural crops is likely to
drive up food prices.
Inflation 1/2
FOOD INFLATION

Source: Eurostat
Food inflation: risks of a rise are intensifying
Food inflation remains moderate and continues to slow, both in
Luxembourg (1.3% in July after 2.8% in January) and in the eurozone
(0.8% after 2.2%). This trend is due in particular to easing pressure
on meat prices (+2.5% year-over-year in July in the eurozone,
compared with 5.3% in January). Meat price increases were
particularly sharp between 2021 and 2023 due to the delayed impact
of soaring production costs and reduced livestock herds. Other
products that had contributed to food inflation in recent months,
such as coffee and chocolate, are also exerting significantly less
pressure than at the beginning of the year.
Upward risks, however, remain significant. Droughts and heat waves
in 2026 have already affected harvests in Europe, while low water
levels in the Rhine and Danube rivers are disrupting freight transport
and driving up certain logistics costs. Added to this is the rise in
nitrogen fertilizer prices, linked to the closure of the Strait of
Hormuz. Finally, meteorological agencies are forecasting a strong to
very strong El Niño event by the end of the year, which could
exacerbate pressures on agricultural commodities, particularly
tropical crops. In this context, STATEC projects food inflation of 2.1%
in 2026, rising to 2.4% in 2027.
Inflation 2/2
RESTAURANTS, CAFÉS, AND SIMILAR ESTABLISHMENTS*

Sources: Eurostat, STATEC (*excluding cafeterias)
Slightly higher pressure on restaurant prices
Restaurant prices rose sharply in 2022 and 2023, both in
Luxembourg and in the euro area. Since 2025, their growth has been
around 4% in the euro area, a rate significantly higher than that
observed before the pandemic (1.7% per year between 2010 and
2019). In Luxembourg, the increase was still limited to 3% in 2025,
but it has since caught up with that of the euro area, reaching 3.9%
in July.
Despite this convergence, restaurants contribute more to inflation in
the eurozone than in Luxembourg, particularly to inflation in the
services sector. This is due to their greater weight in the household
consumption basket (8.6% in the eurozone versus 7.2% in the
Luxembourg CPI; or 18.3% of services in the eurozone versus 16% in
Luxembourg). Households in the euro area also spend a higher
proportion of their food budget (food products, restaurants,
cafeterias, and cafés) on meals eaten away from home. This share
averages 37%, compared with 34% in Luxembourg. Since the health
crisis, residents of the Grand Duchy have reduced this proportion by
2 percentage points compared to 2019. Conversely, several
eurozone countries have seen a marked increase in dining-out
spending, notably Spain and France, where the share of meals eaten
away from home in the food budget has risen by about 8 percentage
points since 2019.

0
10
20
30
40
50
60
70
80
90
100
January February
March
April
May
June
July
In millions
Precipitation in 2026
Same, 1995–2025 average
-2
0
2
4
6
8
10
12
14
16
18
20
Jan-20
Jan-21
Jan-22
Jan-23
Jan-24
Jan-25
Jan-26
Year-over-year change in %
Luxembourg
Eurozone
0
1
2
3
4
5
6
7
8
9
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
Jan-20
Jan-21
Jan-22
Jan-23
Jan-24
Jan-25
Jan-26
Year-over-year change in %
Contribution to inflation in % points
Eurozone (left scale)
Luxembourg (left scale)
Eurozone (right scale)
Luxembourg (right scale)

Conjoncture Flash August 2026
Labor Market
HOURS WORKED BY TEMPORARY WORKERS

Sources: IGSS, STATEC (seasonally adjusted data)
Recovery in temporary employment
In Luxembourg, the number of hours worked by temporary workers
increased by 10% between the 1st quarters of 2025 and 2026,
breaking the downward trend observed since early 2022.
Construction (accounting for nearly 40% of total hours worked by
temporary workers in 2025) is the main driver of this recovery,
posting a year-over-year increase of nearly 20% in the 1st quarter of
2026. The leading indicator nature of temporary work—an early
signal of increased labor demand—suggests a certain recovery in
employment in the construction sector (following a stabilization
between Q1 and Q2 2026, according to preliminary data). The
“transportation and warehousing” sector is also contributing
significantly to the rise in temporary staffing hours, with a 40%
increase compared to the 1st quarter of 2025. Manufacturing (+5%)
and financial and insurance activities (+74%, though accounting for
only 4% of temporary staffing hours last year) are contributing to a
lesser extent. In contrast, declines are being recorded in information
and communication (-80% year-over-year, following a peak around
the turn of 2025) and in retail (-9%).
Despite this recent recovery, the total volume of temporary agency
hours remains 18% below its level at the start of 2019 (though it has
more than doubled in transportation and healthcare).
Construction
PRICES OF CONSTRUCTION SERVICES

Sources: European Commission, Eurostat, STATEC
Note: For Luxembourg, construction prices are extrapolated based on semi-annual data.
A (still) moderate acceleration in construction prices
The outlook for construction service prices had risen significantly
starting in March, in response to inflationary fears linked to the war
in Iran. Over the past few months, these concerns have not
intensified further in Luxembourg, but price expectations remain at
a significantly higher level than at the beginning of the year. In the
eurozone and neighboring countries, h