Luxembourg: Economic growth rises in the third quarter of 2025
Sequential growth among highest in euro area: Luxembourg’s GDP increased 1.1% in seasonally adjusted quarter-on-quarter terms in Q3, following a 0.8% expansion in the prior quarter. Q3’s reading was the strongest since Q1 2024 and ranked among the fastest in the euro area.
In annual terms, economic output grew 2.6% in Q3, following a 0.6% contraction in the prior quarter.
Private spending and fixed investment drive improvement: Compared with the previous quarter’s data, Q3’s figures improved for private consumption (+1.2% in seasonally adjusted quarter-on-quarter terms vs -0.3% in Q2), government consumption (+1.3% vs +0.7% in Q2), total investment (+8.0% vs +2.8% in Q2), exports of goods and services (+0.7% vs +0.4% in Q2) and imports of goods and services (+1.9% vs -0.6% in Q2).
GDP growth accelerated on the back of rebounding household consumption and a jump in total investment, fueled mainly by satellite purchases. Investment in metal products and machinery also provided support.
GDP growth to cool but remain strong in Q4: Our Consensus is for sequential GDP growth to be losing momentum in Q4, though it should remain solid. Available data points to ongoing strength in private spending: Retail sales rebounded in October relative to Q3, and the lagged impact of earlier interest-rate cuts should continue to buttress domestic demand.
After four years of little to no growth, the economy is expected to grow faster in 2026, while remaining below its pre-pandemic 10-year average. Export momentum should strengthen as the financial sector—accounting for roughly 30% of GDP—benefits from rising interest in euro area financial services and government initiatives to bolster the industry. In addition, lower interest rates should support a rebound in fixed investment. Faster-than-expected recoveries in the financial and construction sectors are upside risks.