Luxembourg Inflation Rises to 3.7%; Next Wage Indexation Possible in Q3 2023

On Friday 5 May 2023, Luxembourg's statistical institute, STATEC, announced that the annual rate of inflation had risen to 3.7% in April 2023 (up from 3.6% one month earlier).

In April 2023, the national consumer price index, calculated by STATEC, increased by 0.9% compared to the month before. STATEC attributed this monthly increase to the rise in the prices of certain services, triggered in particular by the new wage indexation (as of 1 April 2023). Added to this was a seasonal increase in travel costs and the continuous rise in food prices.

Service prices went up by 1.6% in one month. Rates for retirement and care homes increased by 2.5% from 1 April 2023. In addition, prices for home maintenance and repair services increased by 2.2%. Price increases were also noted in the restaurant (+0.6%) and home insurance (+3.2%) sectors. Moreover, STATEC recalled that the pricing of medical and dental services is mechanically linked to wage indexation.

In the context of the Easter holidays, airline ticket prices soared by 32.2% compared to March 2023. There was also a 21.2% increase in package tour prices.

Food prices continued their uninterrupted upward trend since October 2021 and increased by another 0.4% between March and April 2023. The strongest monthly increases were noted for breakfast cereals (+4.3%), yoghurt (+2.5%) and fresh fruit (+1.6%). Price increases were also recorded for alcoholic beverages: wine prices increased by 3.5% and beer prices by 2.1%. On the other hand, the prices of fresh vegetables (-6.4%) and baby food (-3.2%) decreased over one month. In annual comparison, food prices were 12.7% higher.

Fuel prices decreased by 1.3% over one month, with household heating oil prices falling by 5%. At the pump, the price of a litre of Diesel fell by 4.8% while that of a litre of petrol rose by 2.8% compared to the previous month. The prices of black gold derivatives in the index basket were 13.5% lower compared to April 2022.

Price decreases were recorded in April 2023 for mobile phone services (-2.6%), plants and flowers (-2.1%), household textile articles (-1.3%) and jewellery (-0.5%) .

The annual inflation rate stood at 3.7%, down from 3.6% a month earlier. The underlying annual inflation rate gained 0.3 percentage points and stood at 4.9% in April 2023.

STATEC has now forecast annual inflation of 3.9% for 2023, which would bring forward the next wage indexation (linked to a cost-of-living index) to the end of the third quarter of 2023. Note that there have already been two wage indexations this year: the first in February and the second in April.

However, STATEC revised downwards its inflation forecasts for 2024 (to 2.5%), due to "the relative lull" in the energy markets.