Luxembourg: GDP falls at a more moderate pace in the first quarter
GDP slid at a milder rate in the first quarter, contracting 0.4% on an annual basis (Q4 2022: -2.2% year on year). The milder decline reflected improvements in private consumption, fixed investment and exports compared to the previous period.
Private consumption growth bounced back, growing 2.5% year-on-year in Q1 from a 0.2% contraction in Q4, while fixed investment dropped at a softer rate of 5.9% in Q1, from the 11.3% plunge tallied in the previous quarter. That said, public consumption growth slowed, expanding 3.3% (Q4 2022: +4.2% yoy).
On the external front, exports of goods and services fell 2.4% on an annual basis in the first quarter, which was an improvement from the fourth quarter’s 4.2% contraction. Similarly, imports of goods and services slid at a milder rate of 2.6% in Q1 (Q4 2022: -4.6% yoy).
On a seasonally adjusted quarter-on-quarter basis, GDP bounced back, increasing 2.0% in Q1, contrasting the previous quarter’s 3.7% contraction. Q1’s reading marked the best result since Q4 2021.
Despite an improvement from Q4, the Q1 print still revealed a contraction, reflecting the country’s vulnerability to global macroeconomic conditions. As a hub for multinational capital exchanges, fixed investment and exports in Luxembourg are highly volatile and influence the country’s GDP outlook heavily. Nevertheless, certain underlying figures showed encouraging momentum: Private consumption growth gained speed as inflation weakened.
Looking ahead, GDP growth should soften this year; weaker demand in Europe amid still-high inflation and tighter monetary policy should dampen activity.