- The global economy is in the midst of a growth cycle. As a result, GDP growth is more resilient to shocks than initially anticipated.
- The figures for the second quarter bear this out, despite the sharp rise in oil prices, whose negative impact on growth is offset by a series of reflationary forces.
- The driving force behind the current growth cycle is clear: artificial intelligence (AI).
- The world’s major economies are currently engaged in a broader push to expand their capital goods investment.
- While European and US households are experiencing more or less the same energy price shock, inflation and household consumption remain higher in the US.
- Higher and above-target inflation calls for monetary tightening.
- Inflation is exceeding the target set by three of the four central banks examined in this publication (the US, the UK, the Eurozone). Inflation is currently expected to peak in Q4 2026 or Q1 2027, but there is a significant risk that energy inflation will spread further to other components of inflation in the future.
- Inflation can also be a sign of (too much) economic strength (in the US).
- Monetary policies also have to offset the inflationary effects of fiscal policy (particularly in Japan).
- The outbreak of the conflict in Iran acted as a catalyst: the ensuing rise in energy prices contributes to the recent increase in long-term rates (which had been trending downwards at the start of the year) to levels close to those of 2002.
- The other issue is the high level of fiscal deficits (too high for a period of growth), reflecting different fiscal trajectories. In the US, the UK, France and Germany the public debt-to-GDP ratio is increasing, while it has stabilized in Italy and decreased in Spain and Japan.
- The rise in long-term interest rates will weigh on public finances. The fiscal arithmetic is simpler today than it will be in 2030. By 2030, the effective rate will have risen and caught up with GDP growth.
Advanced Economies: Resilience to shock after shock (forecasts as of 30 September 2026)
United States: Expansion intact through successive shocks (updated on 2 October 2026)
Eurozone: Growth on track despite the turbulence (updated on 1 October 2026)
Germany: An export-driven recovery (updated on 1 October 2026)
France: Growth is bending, but not breaking (updated on 1 October 2026)
Italy: European funds bolster growth, while debt constraints persist (updated on 1 October 2026)
Spain: Robust growth (updated on 5 October 2026)
United Kingdom: Growth remains resilient in front of shocks (updated on 1 October 2026)
Japan: Growth under strains (updated on 1 October 2026)
