Global Economic Outlook: February 2026

Geopolitical events and related uncertainties have contributed to choppy commodity and financial markets, but S&P Global’s Purchasing Managers Indexes (PMIs®) point to relatively resilient economic conditions.

At around $68 per barrel at the time of writing, the price of Dated Brent crude oil is below its peak year-to-date, but still more than 10% above its end-2025 level, amid ongoing concerns about potential disruption to Middle Eastern supply. Prices of precious metals are below their January record highs, but remain very elevated.

US equity markets have come under pressure, with the S&P 500 recording back-to-back weekly losses in the first half of February. The tech-heavy NASDAQ composite index has continued its recent underperformance, losing ground for five straight weeks. The US Treasury market has benefited from a related ‘flight to safety,’ with 10-year yields falling to their lowest level since November. Narrowing yield differentials are forecast to continue to lean down on the US dollar.

January’s PMI® data signaled a pick-up in global growth momentum, although output expectations remained lackluster.

The global composite output index, based on manufacturing and services activity across more than 40 economies, rose by half a percentage point in January. The level of the composite index has historically been indicative of sub-3% global real GDP growth, broadly aligning with our forecast. January’s improvement reflected a marked pick-up in the manufacturing output index, which matched its highest level since June 2024. Manufacturing new orders expanded at the fastest rate for almost a year.

Global services activity also picked up, although the implied rate of expansion remained below its average during the fourth quarter of 2025. The signals from January’s output expectations data were less encouraging, with geopolitical uncertainties — particularly related to trade — again flagged by survey participants as a prime concern. 

Key changes in our February forecast update include higher projections for real GDP growth in the US and India this year, pushing up our global growth forecast.

Our US annual real GDP growth forecast for 2026 was raised to half a percentage point above 2025’s estimated rate of growth. This primarily reflects “carry over” effects due to a substantial markup to expected US growth in the final quarter of 2025, captured in our tracking estimates. The growth profile through 2026 is also a bit stronger, consistent with somewhat more favorable financial conditions and a larger inventory rebuild than previously forecast.

The more positive assessment of India's annual real GDP growth forecasts for the current and next fiscal year reflects news from the budget and recent trade agreements. This year’s eurozone growth forecast has also been edged up, helped by a more positive assessment for Germany.

Our annual global real GDP growth forecast for 2026 has risen to 2.9%, matching 2025’s estimate, and above the market consensus expectation — where it has been since mid-2025 amid ongoing economic resilience.

We forecast somewhat lower annual consumer price inflation rates in 2026 in most major economies, but recent developments have flagged some upside risks. The projected moderations in inflation are driven by two key factors: an expected decline in crude oil prices and an easing of underlying price pressures.

The recent news on both has been mixed. For the former, concerns over potential disruption to Middle East supply have kept oil prices elevated. For the latter, although core inflation data late in 2025 showed some encouraging signs of moderation, January’s PMI® figures pointed to some emerging cost pressures.

The assumptions for oil prices which fed into our February forecast update were lifted in the very short-term, but supply-driven declines are still projected later in 2026. The base case is an average Dated Brent price of $63/b in the first quarter, with a trough of around $56/b in mid-year, followed by a gradual rise thereafter as supply and demand move more into balance.

Inflation rates in India and mainland China are forecast to buck the trend and rise in 2026. In the former, unfavorable base effects related to weak food price inflation in 2025 are the key factor. In the latter, anti-involution initiatives and policy stimulus aimed at supporting consumer demand are expected to diminish disinflationary pressures, although inflation is forecast to remain low. 

Fundamental drivers continue to favor further US dollar deprecation. January’s slide was temporarily reversed by the US administration’s nomination of Kevin Warsh to chair the Federal Reserve, but the rebound faded quite quickly.

Following 2025’s near-4% drop, our model-based projections for the broad nominal effective US dollar index incorporate somewhat smaller annual declines out to 2028, consistent with narrowing yield differentials and persistent external imbalances. Downside risks include capital repatriation and adverse US economic news, including on the labor market.

January’s US employment report was positive at face value, but the data were overshadowed by large downward revisions to prior payroll gains in the annual benchmarking. Employment gains have also been concentrated in healthcare-related areas.

Futures markets continue to discount a pause in Fed rate cuts until mid-2026 and only gradual easing through this year. At the time of writing, an 80% chance of a cut of 25 basis points was discounted by June’s policy meeting, followed by a return to the estimated neutral range of 3.00-3.25% in the fall. These expectations broadly align with our forecasts.  

This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.