PostedMay 31, 2022, 4:00 p.m.
LUXEMBOURG – Three months following the start of the Russian invasion, the first figures are starting to arrive and they are not very good.
The war weighs on the Luxembourg economy.
AFP
On February 24, Vladimir Putin ordered the invasion of Ukraine, a thunderclap which – we knew – would have economic consequences for a world which was barely recovering from the health crisis. After the suppositions, place today with the figures. “The hard data (production, turnover, etc.) are starting to arrive for the month of March,” writes Statec in its flash conjuncture for the month of March. “And they generally seem to confirm the trends noted in the opinion polls”.
Thus, the volume of retail sales fell by 0.7% between February and March in Luxembourg (-0.4% in the euro zone). And the decline is particularly marked for the flow of fuels: -11% in Luxembourg once morest -3% in the euro zone. For its part, industrial production also fell back by 3.2% (-1.8% in the euro zone) with a sharp fall in the area of capital goods (-4.5%). Similarly, production in construction fell by 2.2% while it stagnated in the euro zone.
Supply difficulties
A final figure which is not worrying following significant increases in January and February (+5.7% and +1.3%). “If the construction order books seem to remain well filled, the fact remains that the current context is likely to reinforce the difficulties of supplying materials, and therefore to lengthen production times”, warns Statec.
Supply difficulties are also felt in the automotive sector: Luxembourg recorded only 3,500 new registrations in April 2022, a drop of 22% over one year, to a level close to that of the mid-1990s.
The financial center begins to rock
On the services side, Statec notes that “confidence has not been shaken too much”, in particular thanks to the lifting of health restrictions, which has given a smile, among other things, to the Horeca sector, even if the figures tourist numbers in the 1st quarter of 2022 remain 30% lower than those of the 1st quarter of 2019. However, passenger traffic at the airport recovered significantly last April, reaching a level comparable to that of April 2018.
It should be noted that if it had held firm in 2021, the Luxembourg financial sector is starting to rock. After a slight decline in the last quarter of 2021, the sector’s added value should fall further in the 1st quarter of 2022. The rise in interest rates (already underway in the United States and Great Britain) announced for this summer in the euro zone, “should nevertheless favor certain sections of banking activity”.
Very dynamic employment sector
Inflation remains high (+7% in Luxembourg in April, +7.4% in the euro zone) and “the pressures should remain high, at least in the short term”, according to Statec. Always the fault of supply problems and rising raw material prices which affect the entire production line, right up to the consumer. The accommodation and catering sectors are particularly hard hit and will experience “multiple shocks” from increases in energy, food and labor. Statec indicates that prices in hotels, restaurants and cafes have already jumped 5.5% over one year.
A signal is green: that of employment which remains “very dynamic” in the first quarter of 2002 and “follows a more favorable trajectory than that forecast by the European Commission last autumn”. While the unemployment rate stagnated in April (4.7%), it has steadily fallen over the past year (by at least 0.1 point each month).
