RTL Today - STATEC: Luxembourg economy shows signs of recovery, but challenges remain

Luxembourg’s economy grew for a third consecutive quarter this spring, offering tentative signs of recovery after three years of stagnation, however challenges remain – especially in construction.

The Grand Duchy's economy expanded by 0.6% in the second quarter of 2025, according to figures from the national statistics office, STATEC. It is the third consecutive quarter of growth, following a host of post-pandemic challenges, not least the war in Ukraine.

Past estimates have been revised. GDP growth in 2023 is now put at +0.1%, compared with an earlier estimate of -0.7%. Output in 2024 is judged to have risen by +0.4%, down from the previous figure of +1.0%.

Household and public spending

Household spending rose by 0.2% in Q2 after contracting in Q1. Outlays increased for health services (+1.5%), restaurants and catering (+1.2%) and food products (+0.8%), but fell for property-management services (-1.3%) and vehicle-related goods and services (-1.0%).

Overall, public spending grew by 0.9%, broadly in line with the pace of previous quarters.

Investment

Gross fixed capital formation fell by 1.1% in Q2. Non-residential construction dropped -2.5%, and investment in aircraft and satellites fell -4%. By contrast, machinery spending increased +1.4%, metal products +1.1%, and other transport equipment +0.9%.

Trade

Exports were unchanged on the quarter (0.0%). Non-financial services exports rose +0.7%, but goods exports declined by -0.6% and, financial services exports -0.8%. Imports mirrored the pattern, leaving the trade balance flat and offering a subdued projection.

Wages and food prices

Wages rose by +4.4% year on year in Q2, up from +2.8% in Q1. May’s automatic indexation contributed +1.7 percentage points of the increase.

It is forecast that wages will continue to slow for the 2nd half of 2025, aided by inflation reaching close to target levels.

Driven mostly by adverse weather, food inflation reached +2.6% in Luxembourg and +3.2% across the eurozone in August. Among the worst hit, coffee prices were up 150% and cocoa 330% compared with early 2023, though both fell around 25% between January and July 2025.

Unemployment

Unemployment eased to 5.9% in June, from 6.0% in April–May. The fall was concentrated among jobseekers registered for under four months, especially in construction and commerce.

The latest figures provided by STATEC offering its most up-to-date snapshot of the economy confirm that Luxembourg has moved out of contraction but highlights the fragility of the recovery.

Spending remains steady and inflation is easing, but investment and exports are weak, leaving the outlook for the remainder of 2025 mostly subdued, despite positive signs.