Sharp drop in annual inflation rate in January to 1.3%

In January 2026, the annual inflation rate, calculated by STATEC, fell sharply following a 9.2% year-on-year decline in energy prices.

Chart 1: Annual inflation rate and contributions

Source: STATEC

Energy products fell sharply at the beginning of the year, mainly due to a 10.5% drop in electricity prices compared to 2025, a movement essentially linked to the state's contribution to network usage tariffs. Petroleum products also continued the downward trend that began at the end of 2025, despite the increase in the CO₂ tax in January 2026: gas fell by 2.1% and heating oil by 1.3% compared with December 2025. Pump prices will fall by 1.2% for diesel and 1.3% for gasoline. Overall, petroleum products show an annual decline of 9.2% and a monthly decline of 1.6%. Without the increase in the CO₂ tax, the decline in petroleum products would have been even more pronounced, reaching -10.2% over one year and -2.7% over one month.

As is the case every year, non-energy industrial goods were affected in January by significant price decreases due to the winter sales. Clothing and footwear recorded a 16.6% decrease compared with December and remained 3.3% cheaper than the previous year, reflecting discounts linked to sales that were more pronounced than in previous years. Products related to furniture, household appliances, jewelry, watches, and personal and household equipment also experienced a decline following the sales at the beginning of this year, but to a lesser extent. These reductions will be mostly offset next month, with the indices for these goods returning to their pre-sale levels. Price increases for certain goods were also noted at the beginning of the year: the cost of newspapers and periodicals rose by 4.2% over one month, while that of games and toys increased by 2.4%, due to the end of holiday promotions.

Services rose by 2.7% year-on-year, but fell by 0.7% compared with the previous month. Travel costs fell month-on-month following the end of the Christmas holidays. Airfares also remained below their January 2025 level (-4.7%), while package holidays posted an annual increase of 11.8%. Traditionally, many price adjustments are made at the beginning of the year, which was the case for museum admissions (+4.6%), sports-related services, including swimming pool admissions and fitness memberships (+7.9%), and driving lessons (+4.6%).

Food prices (including alcohol and tobacco) rose by 3.0% over the year. Tobacco products showed the most marked increase, with a rise of 10.3%, partly linked to the increase in excise duties applied to them. Food prices rose by 2.7% compared to January 2025, with particularly sharp increases for meat (+5.1%), chocolate (+13.8%), coffee (+13.9%) and fruit (+2.2%). Alcoholic beverages remained stable year-on-year, but rose by 3.1% compared to December, as holiday promotions ended in January.

Table 1: Price changes for the four main IPCN aggregates

Source: STATEC

The annual inflation rate fell from 3.1% to 1.3% in January. The general index excluding energy fell from 2.3% to 2.1%. The general index for January, expressed on a base of 100 in 2025, stands at 99.28 points.

For the calculation of the sliding scale of wages, the law provides for the neutralization of the additional autonomous excise duty known as the “CO₂ tax” levied on energy products and increases in taxes and excise duties levied on the prices of tobacco products. This measure implies, from January 2026, a new connection coefficient (10.29714) linking the consumer price index base 100 in 2025 to the index base 100 on 1.1.1948. The half-yearly average of the index linked to the base 1.1.1948 falls from 1036.63 to 1035.63 points. The next indexation will be triggered when the value of 1038.79 is reached.

Updating of the HICP and the NCPI from 2026

From 2026, the Harmonized Index of Consumer Prices (HICP) and the National Index of Consumer Prices (NICP) will be published on a 2025 = 100 basis. The base year is updated periodically, simultaneously in all EU Member States. This ensures that the indices remain comparable over time and between countries. The change in the base year has no impact on inflation trends. Only the reference scale changes. Price variations remain the same.

The NCPI and HICP will also use a new classification called ECOICOP v2 from 2026. This classification determines how products and services are grouped in the IPCN and HICP and is updated simultaneously in all EU member states. It allows the structure of the indices to be realigned with current consumption patterns, new forms of expenditure to be further specified, and categories deemed obsolete or too broad to be revised. Some key elements:

• The former division “12 - Miscellaneous goods and services” is split into two new divisions: “12 - Insurance and financial services” and “13 - Personal care, social protection, and miscellaneous goods and services.”
• Categories such as fruits and vegetables are more detailed.
• Several new categories have been included in the price index, such as gambling, home care services, electric car charging, and goods delivery.

These changes only marginally alter the level of the consumer price index and refine the classification according to which this index is compiled.

In order to ensure continuity of analysis, STATEC has recalculated historical series from 1995 to 2025 according to the new ECOICOP v2[1] classification. This recalculation does not affect historical inflation rates. Data based on the old version of the nomenclature and the previous base year remain available on the statistics portal[2].

In accordance with current national regulations, the weighting of the basket of goods and services has been updated to take into account changes in household consumption patterns (see Mémorial A-No. 25 of February 3, 2026[3]).

TABLE 2: Price changes in the 13 divisions of the IPCN

Source: STATEC

[1] https://gd.lu/czZkTX

[2] https://gd.lu/c5wZvk

[3] Grand-Ducal Regulation of January 30, 2026 updating the amended Grand-Ducal Regulation of December 20, 1999 on the establishment of the consumer price index: https://legilux.public.lu/eli/etat/leg/rgd/2026/01/30/a25/jo