Luxembourg Economy Contracts in Q4 as Investment Plummets

Luxembourg’s economy contracted 0.9% quarter-on-quarter in the second quarter of 2026, reversing from a revised 0.3% growth in the previous three-month period. This marked the first contraction after six straight quarters of growth, as declines were recorded in gross fixed investment (-1.9% vs 6.3% in Q1), and household expenditure (-0.3% vs -0.8%), while growth eased for government spending (1.1% vs 1.8%). Net trade also weighed on the economy, with both exports (-0.4% vs -1.2%) and imports (-0.8% vs -2.1%) declining at softer rates. On the production side, declines were seen in industry, including energy and water distribution (-3.7% vs -1.6%), construction (-2.1% vs 2.7%), trade, transport, accommodation and food services (-0.8% vs 1.1%), and financial and insurance activities (-1.5% vs -0.7%). Conversely, growth was recorded in agriculture, forestry, and fishing (4.5% vs 0.9%). On an annual basis, GDP grew 1.3% in Q2, slowing from a revised 2.8% rise in the prior quarter.

Luxembourg’s economy recorded a flat quarter-on-quarter reading in the first quarter of 2026, unchanged from the previous quarter. The stagnation was mainly driven by a decline in household consumption (-0.6% vs 0.6% in Q4), while growth in public spending slowed (0.8% vs 1.1%). Net trade also weighed on the economy, as imports fell at a slower pace than exports. Meanwhile, the weakness was partly offset by a sharp recovery in fixed investment (5.2% vs -12.0%). On the production side, agricultural activity accelerated (2.5% vs 0.5%), while construction (2.4% vs -0.5%), commerce (1.7% vs -1.4%), and real estate (0.7% vs -0.4%) returned to growth. On an annual basis, GDP grew 1.6% in Q1, easing from a downwardly revised 2.1% expansion.

Luxembourg’s economy shrank by 0.1% in Q4 2025, following an upwardly revised 1.2% expansion in Q3, ending a streak of four consecutive quarters of solid growth. The contraction was mainly driven by a sharp drop in fixed investment (-11.5% vs 12.8% in Q3), while growth also slowed for household consumption (0.8% vs 1.1%) and public spending (1.1% vs 1.5%). Net trade provided a modest boost, as exports fell less than imports. On an annual basis, Luxembourg’s GDP growth eased to 2.4% in Q4, down from 3.2% in the previous quarter. For the full year 2025, the economy grew 0.6%, slightly above 0.4% in 2024 but still well below the historical average of 2.5% per year during 2010–2019.