Issue #3 · July 29, 2026 · Data as of 2026-07-29
Global growth: 1.9%US recession risk: 20.6%US inflation: NormalFinancial conditions: Neutral
Global growth, inflation, and central bank divergence
The global economy is slowing. Our GDP-weighted growth gauge has slipped to 1.9% — below the post-2010 average. The synchronized rate hikes of 2022–2023 are still working their way through the system, and the world is feeling it.
The headline number masks significant divergence underneath. India leads the pack at 6.5% growth, while Germany brings up the rear at 0.6%. A 5.9-percentage-point gap between the fastest and slowest major economy is wide by historical standards — a sign that this cycle is playing out very differently depending on where you are in the world.
Inflation has broadly cooled. Most economies in our panel are back near or below their central banks' 2–3% targets, which opens the door for rate cuts and gives policymakers more flexibility to support growth.
12 major economies — ~80% of global GDP
India leads the growth table at +6.5%, while Germany is at the bottom with +0.6% — a 5.9-point spread that reflects a deeply uneven global cycle. On inflation, 8 of 10 economies with data are at or below 2.5% — the post-hike disinflation has broadly landed, though pockets of stickiness remain. Equity markets are split: South Korea leads year-to-date at +39.8%, while India is the laggard at -9.9%.
| Economy | GDP % Actual | GDP % Forecast | CPI % | Unemp % | Curr Acct % GDP | Govt Debt % GDP | Policy Rate % | Stock YTD % |
|---|---|---|---|---|---|---|---|---|
| United States | +1.8 | +1.8 | 2.2 | 3.9 | -3.6 | 142 | 3.63 | +6.7 |
| China | +1.8† | +1.8† | 2.0† | 6.0† | -0.0† | 104† | 2.90† | -5.2 |
| Germany | +0.6 | +0.6 | 2.1 | 2.9 | +3.8 | 74 | 2.25 | +3.8 |
| Japan | +0.6 | +0.6 | 2.0 | 2.5 | +4.1 | 193 | 0.84 | +20.3 |
| United Kingdom | +1.4 | +1.4 | 2.0 | 4.5 | -2.2 | 103 | 0.25† | +9.2 |
| France | +1.1 | +1.1 | 1.8 | 7.3 | +0.4 | 121 | 2.25 | +3.2 |
| India | +6.5 | +6.5 | 4.0 | 4.9 | -1.9 | 78 | 5.50† | -9.9 |
| Brazil | +2.5 | +2.5 | 3.0 | 7.4 | -1.8 | 106 | 14.39 | +8.3 |
| Canada | +1.8 | +1.8 | 2.0 | 6.0 | -0.0 | 104 | 2.27 | +10.8 |
| Australia | +2.3 | +2.3 | 2.4 | 4.5 | -2.4 | 49 | 4.35 | +2.5 |
| South Korea | N/A | N/A | N/A | N/A | N/A | N/A | 2.54 | +39.8 |
| Italy | N/A | N/A | N/A | N/A | N/A | N/A | 2.25 | +13.9 |
10 of 12 economies have full data this month. South Korea, Italy show partial data this month — their macro statistics come from IMF WEO or OECD, which publish quarterly or semi-annually rather than monthly. A † marks a figure older than this basket’s freshness window; N/A means not reported. Sources: FRED (US) · OECD SDMX (Europe, Japan, Canada, Australia) · IMF WEO (India, Brazil, China).
Rotating spotlight — this week: Germany
Germany: the economy grew at 0.6% (most recent reading), inflation is running at 2.1%, unemployment stands at 2.9%, the central bank's policy rate is 2.25%, government debt is 74% of GDP. The local stock market has gained 3.8% this year.
A permanent fixture — the US as the world's largest economy and key driver of global financial conditions
Right now the yield curve is not inverted — 10-year Treasury yields sit +0.35% above 2-year yields, which is the normal, healthy relationship. When this gap turns negative (inversion), it's often a sign that investors expect the economy to slow. The gap between long- and short-term rates widened by 5 basis points this week (one basis point = 0.01%) — a positive sign, meaning the curve is moving further from inversion territory.
Our recession model puts the odds of a US recession starting within the next 12 months at 20.6%. To put that in context: moderate — worth watching, but not yet alarming. The model works by looking at the gap between 10-year and 3-month Treasury yields (currently +0.71%) — the wider that gap, the lower the recession risk. The probability moved down 1.0 percentage points from last month. One caveat worth keeping in mind: this model was originally calibrated on US data from 1960 to 1994. The post-2008 era of central bank bond-buying and forward guidance changed how the yield curve connects to the real economy — the 2022–23 inversion, for instance, lasted far longer than the historical model would have predicted without triggering a recession. Treat the figure as a useful reference point, not a precise forecast.
Inflation is currently Normal. Price growth is in its normal historical range — not too hot, not too cold. This gives the Federal Reserve room to adjust rates in either direction if the economy needs it, which is generally a stable backdrop for markets.
Our Financial Conditions Gauge reads Neutral (+0.23 on a −1 to +1 scale). It combines three signals: high-yield credit spreads (do investors trust risky borrowers?), real interest rates (the interest rate after you subtract inflation), and the yield curve shape (is the bond market worried about a slowdown?). Credit spreads are somewhat elevated — investors are demanding a bigger premium to hold corporate debt over safe Treasuries — but the yield curve and real rates aren't adding to that concern. The net result is a wash.
The picture is mixed, but the balance of signals skews toward caution. Recession risk is moderate — not alarming, but not something to dismiss. With inflation above its historical average and real rates less restrictive than they appear, the Fed has little incentive to cut soon: expect borrowing costs to stay higher for longer than markets may be pricing in. The most important missing piece is a full read on global growth — US resilience is only half the story, and weakness in Europe or a China slowdown could eventually find its way home. Watch high-yield credit spreads and the global economy section of future issues for early signals of change.
All figures are model outputs based on public data — not investment advice.
What global economic leaders are saying this week
“If there were people in the household or the business sector and the financial markets who thought that this central bank was going to be comfortable with an inflation objective above 2%, well, I guess they'd be disappointed.”
“Resilience means the ECB can raise rates to address inflation without fear it becomes a source of financial stress.”
“You can't afford not to deepen trade relations with other countries out there.”