Luxembourg: lackluster morale

The new Ukraine crisis protects company morale for the time being. For consumers, it’s a different story.

Since the outbreak of the Ukraine conflict, companies in the euro zone and in Luxembourg, with the exception of industry, seem to be in good spirits. Consumers are particularly concerned about the consequences of this war, particularly the rise in prices it has caused flash situation released by Statec yesterday.

Business confidence in the Eurozone and Luxembourg does not appear to be too affected by the fallout from the conflict in Ukraine at the moment the National Institute for Statistics and Economic Studies of the Grand Duchy. But the feeling is very different depending on the field of activity. According to data from the Euro Area Purchasing Managers’ Survey (PMI), activity in services continued to pick up in March and April, particularly in tourism and leisure activities, which benefited from the easing of sanitary restrictions.

The activity index in industry, on the other hand, has fallen significantly over the same period, although it remains at a level consistent with an expansion in activity. European manufacturers speak of growing supply problems, which are no stranger to the development of the conflict and which further intensify the strict restrictions in China.

They also show the impact of sharp increases in the prices of their inputs (raw materials, components, energy) on their production prices and a more moderate increase in orders in response. Given the current gas and electricity boom, the most energy-intensive industries are in a precarious position (which also depends on the nature of their energy supply contracts), Statec specifies. In the event of delivery difficulties, the automotive industry is particularly affected by bottlenecks in certain components.

Consumer morale has plummeted

In Luxembourg, the trends are very similar. Industry confidence in metallurgy, rubber products, plastic products and wood products has fallen. From this quarter onwards, employment growth is likely to flatten out, even if a possible slowdown is not yet in sight. On the other hand, according to Statec, the job prospects (especially in industry) deteriorated slightly in March, even if they remain at a historically high level. Conversely, according to Statec, confidence in non-financial services increased, with this improvement being clearly felt in the areas of accommodation, accounting and legal advice and employment-related activities.

On the other hand, according to Statec, consumer morale is at half-staff. Confidence has gone down. The extent of the slump is even comparable to the outbreak of the pandemic crisis between February and April 2020. In Luxembourg, as in the euro zone, the worsening prospects for the general economic situation are said to be the main reason for this movement at Statec. Households are also significantly more pessimistic with regard to the expected development of their personal financial situation. Consumers expect rising consumer prices. These have already started and are costly despite past and future government initiatives.

High absenteeism in the first trimester

Statec, in its monthly release, also recorded significant workplace absenteeism in the first quarter of 2022 due to the coronavirus outbreak in the country (positive cases, quarantines, isolations). This absenteeism rate was the highest since the health crisis began (6%). At the same time, Statec has noticed an increase in overtime hours, particularly in the least telecommutable sectors such as agriculture, industry, construction and horeca.

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