PUBLISHED January 21, 2026
According to “Die Luxemburger Wirtschaft wächst, aber der Arbeitsmarkt bleibt unter Druck” from Tageblatt.lu, recent data from STATEC, Luxembourg’s national statistics office, show the economy improving in mid-2025. Gross domestic product (GDP) expanded by 1.1 % in the third quarter compared with the previous one. This increase follows more modest growth in earlier quarters: 0.8 % in Q2 and 0.3 % in Q1. Year-on-year, output in Q3 2025 was up 2.7 % compared to Q3 2024. However, the annual figures for the first and second quarters were revised downward significantly. These revisions underscore ongoing volatility in economic performance. Overall, the new data suggest a gradual recovery trend rather than a full return to pre-pandemic levels.
Sector performance varied widely in recent months. Financial and insurance services made the largest contribution to growth in Q3. Trade, transport, hospitality, and public services also added to output gains. Private household consumption rebounded after earlier declines. Spending on dining, transport, and consumer goods helped support domestic demand. Consumer confidence indicators rose notably in November, pointing to improved sentiment. Despite these positives, not all sectors expanded in this period.
The construction sector remained in decline, continuing a long-term shrinkage trend. Industrial output also fell on a yearly basis, reflecting ongoing challenges. Industry’s share of national economic output has now fallen below 5 %, the lowest in Europe. Employment trends reflect mixed economic signals. Job creation occurred, but at a slower pace than in stronger growth periods. State employment was the primary driver of job gains in the last year. New economic forecasts for 2026 and beyond are expected to clarify future prospects.
Luxembourg’s GDP growth in the third quarter of 2025 was a positive surprise after a period of subdued performance. The 1.1 % expansion quarter-on-quarter reflects an acceleration from earlier in the year. Comparisons with the same period a year earlier show that output is also up on an annual basis. Financial and insurance services led the recovery, generating the largest value-added contribution. Trade, transport, accommodation, and hospitality sectors supported broader activity gains. Public administration, education, and health continued to expand, thanks to dynamic government spending. This diversified contribution suggests that growth is not solely reliant on one industry.
Not all sectors benefited equally from the recent upswing in economic activity. While services performed relatively well, other branches continued to struggle. Construction remained on a contraction path, extending a downturn that has lasted for several quarters. High material costs, financing constraints, and weaker demand for new projects have slowed activity. Industrial output also declined on a yearly comparison, reflecting weaker external demand and rising production costs. The shrinking role of industry in the national economy is increasingly evident, with its share now below 5 percent of GDP. This places Luxembourg among the countries with the smallest industrial base in Europe. By contrast, household consumption showed resilience, particularly in retail, hospitality, and personal services. Rising consumer confidence suggests that private spending could remain an important support for growth in the coming quarters. However, economists warn that consumption alone cannot compensate for long-term weaknesses in construction and manufacturing. These contrasts underline a structural shift in the economy toward services, while traditional sectors continue to lose ground.
Employment figures in Luxembourg show moderate growth, but the job market remains uneven. STATEC data indicate around 6,400 net new positions over the past 12 months. This level of job creation is roughly half of what was typical during stronger economic phases. The biggest gains were recorded in trade and business-related services. Financial services also added jobs, though at a slower pace than in previous years. Public sector employment accounted for a substantial share of overall job growth, reflecting ongoing state investment in administration, health, and education. At the same time, construction continued to shed jobs for another year in a row. This has affected both skilled and lower-qualified workers, increasing pressure on certain segments of the workforce. Slow labour market dynamism suggests that companies remain cautious about expanding their staff. Uncertainty about global economic conditions and long-term demand is still shaping hiring decisions. As a result, the labour market is improving only gradually, despite the return to positive GDP growth.
Luxembourg’s economy showed clearer signs of recovery in the third quarter of 2025. Growth, while modest, outpaced earlier quarterly increases and was supported by several sectors. Consumer spending and government services helped offset weaknesses in construction and industry. Labour market gains were positive but lagged behind earlier expansion phases. The relatively slow pace of job creation underscores continuing pressure on employment. New growth forecasts due soon will help clarify whether momentum can be sustained. For now, the economy appears on a cautious path of recovery, tempered by structural challenges.
Not all sectors benefited equally from the recent upswing in economic activity. While services performed relatively well, other branches continued to struggle. Construction remained on a contraction path, extending a downturn that has lasted for several quarters. High material costs, financing constraints, and weaker demand for new projects have slowed activity. Industrial output also declined on a yearly comparison, reflecting weaker external demand and rising production costs. The shrinking role of industry in the national economy is increasingly evident, with its share now below 5 percent of GDP. This places Luxembourg among the countries with the smallest industrial base in Europe. By contrast, household consumption showed resilience, particularly in retail, hospitality, and personal services. Rising consumer confidence suggests that private spending could remain an important support for growth in the coming quarters. However, economists warn that consumption alone cannot compensate for long-term weaknesses in construction and manufacturing. These contrasts underline a structural shift in the economy toward services, while traditional sectors continue to lose ground.
Employment figures in Luxembourg show moderate growth, but the job market remains uneven. STATEC data indicate around 6,400 net new positions over the past 12 months. This level of job creation is roughly half of what was typical during stronger economic phases. The biggest gains were recorded in trade and business-related services. Financial services also added jobs, though at a slower pace than in previous years. Public sector employment accounted for a substantial share of overall job growth, reflecting ongoing state investment in administration, health, and education. At the same time, construction continued to shed jobs for another year in a row. This has affected both skilled and lower-qualified workers, increasing pressure on certain segments of the workforce. Slow labour market dynamism suggests that companies remain cautious about expanding their staff. Uncertainty about global economic conditions and long-term demand is still shaping hiring decisions. As a result, the labour market is improving only gradually, despite the return to positive GDP growth.
Luxembourg’s economy showed clearer signs of recovery in the third quarter of 2025. Growth, while modest, outpaced earlier quarterly increases and was supported by several sectors. Consumer spending and government services helped offset weaknesses in construction and industry. Labour market gains were positive but lagged behind earlier expansion phases. The relatively slow pace of job creation underscores continuing pressure on employment. New growth forecasts due soon will help clarify whether momentum can be sustained. For now, the economy appears on a cautious path of recovery, tempered by structural challenges.
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