Luxembourg’s economy grew more than previously estimated in 2024 and 2025, but still shrank by 0.9% in the second quarter of 2026, according to the latest economic bulletin published by the country’s official statistics agency Statec on Tuesday.
The decline was mainly driven by lower investment and a worsening trade balance, with household consumption also falling slightly.
Despite the contraction, Statec still expects Luxembourg’s economy to grow by 1.2% in 2026. The forecast remains on track because growth in the previous quarters was stronger than initially estimated, it said.
The latest figures also reveal mixed signals across the wider economy.
More vacancies in health and construction
The overall rate of vacant jobs has stabilised after falling sharply from its post-pandemic peak. However, demand differs considerably by sector.
In the third quarter of 2026, health and social work had 230 more vacancies than a year earlier, an increase of around one-third.
Construction recorded 200 additional vacancies, while retail had just over 100 more.
By contrast, business services had 340 fewer vacancies year-on-year, while industry and transport also recorded declines.
Wage growth slows
Average labour costs rose by 2.1% year on year in the second quarter, down from 3.7% in the first quarter.
The agency links the slowdown partly to lower bonuses and other payments, which fell by around 5% per employee compared with the same period in 2025.
The contribution from automatic wage indexation also eased in the second quarter, although Statec expects it to increase again in the third quarter following the June 2026 indexation tranche.
AI pushes up technology prices
The boom in artificial intelligence is also affecting consumer prices. Rising demand from AI data centres for memory chips has reduced the supply available for other uses, pushing up prices, the report noted.
Across the eurozone, the cost of blank storage media, including USB sticks and external hard drives, rose by 52% year-on-year in September.
Prices for computers, laptops and tablets increased by 12%, while mobile phone equipment rose by 1.5%. Statec said price trends in Luxembourg were broadly similar.
Energy costs could rise further
The conflict in the Middle East has pushed up oil prices, with increases now spreading to wholesale gas and electricity markets.
Although gas and electricity prices remain well below their 2022 levels, prolonged increases could eventually affect household bills in Luxembourg, Statec warned.
The impact has not yet appeared in household energy prices, as suppliers purchase a significant share of their energy in advance.
Businesses may see changes in wholesale prices sooner because market fluctuations generally pass through the supply chain quicker.
Inflation forecasts revised upwards
Overall inflation is now projected at 3% in 2026 and 2.7% in 2027, while energy inflation is expected to reach 10.2% this year, Statec said.
The agency is due to publish its next inflation forecasts for Luxembourg on 4 November.