In Luxembourg: An additional index by the end of 2022, tripartite in sight

The index slice we weren’t exactly expecting. Statec updated its price forecasts on Wednesday. Inflation is projected to reach 6.6% in 2022 and 5.3% in 2023. Statec is therefore expecting a new index tranche for the fourth quarter of this year, after the first, which was postponed to the beginning of summer and came into effect in April.

It remains to be seen what we will do with this piece of the index at the end of 2022. Report or application? The social partners will probably have to discuss whether the increase of 2.5% is under the Christmas tree. The government therefore asked Statec to refine its analyzes and update its forecasts in early September. “Based on this development, a next tripartite Coordinating Committee meeting may be convened,” the statement said. So unions, employers and government could come back to the table.

“We will find joint solutions with the social partners that will relieve people and companies,” said Prime Minister Xavier Bettel on Twitter. “Social dialogue is and will remain an important crisis tool and part of our success story. The government leaves no one behind.

Statec notes that the war in Ukraine and tensions in global supply chains continue to fuel inflation. And the increasingly important risks of a gas shortage are not helping matters. Such bottlenecks could have a serious impact on electricity prices.

However, the statistical institute notes that inflation slowed in July, falling to 6.8% in a year, after peaking at 7.4% in June. And “inflation should follow a downward trend and end 2023 at around 3%,” Statec notes. Excluding petroleum products, inflation continues at a sustained pace of 4.7% in July and 4.8% in June, “dynamics that should last through the end of 2023”. Energy prices and the fall of the euro reinforce this high inflation, except for oil products.

Prices in Luxembourg owe a lot to the global context. Alongside the war in Ukraine, China’s “zero Covid” policy is causing major disruption to global production chains, with millions confined to the smallest case. This also increases prices. In Europe, sanctions against Russian aggression in Ukraine have “increased this price pressure”.