Issue #4 · July 30, 2026 · Data as of 2026-07-30
Global growth: 3.0%US recession risk: 20.6%US inflation: NormalFinancial conditions: Neutral
Global growth, inflation, and central bank divergence
Global growth is holding up, but not accelerating. Our GDP-weighted gauge reads 3.0% — the world is expanding, just not at the kind of pace that gets investors excited. The expansion is real, but it's modest.
The headline number masks significant divergence underneath. India leads the pack at 7.6% growth, while Japan brings up the rear at 0.7%. A 6.9-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 is a mixed picture globally — some economies have it under control, others are still working through it. That divergence is one reason central bank paths look so different right now.
12 major economies — ~80% of global GDP
India leads the growth table at +7.6%, while Japan is at the bottom with +0.7% — a 6.9-point spread that reflects a deeply uneven global cycle. Inflation is still running above 3.5% in 3 economies (India, Brazil, Australia), keeping their central banks cautious on the path to rate cuts. Equity markets are split: South Korea leads year-to-date at +29.8%, while India is the laggard at -8.5%.
| Economy | GDP % Actual | GDP % Forecast | CPI % | Unemp % | Curr Acct % GDP | Govt Debt % GDP | Policy Rate % | Stock YTD % |
|---|---|---|---|---|---|---|---|---|
| United States | +2.3† | +2.3† | 3.2† | 4.4† | -3.7† | 126† | 3.63 | +6.7 |
| China | +1.8† | +1.8† | 2.0† | 6.0† | -0.0† | 104† | 2.90† | -5.4 |
| Germany | +0.8† | +0.8† | 2.7† | 3.9† | +3.9† | 65† | 2.25 | +4.0 |
| Japan | +0.7† | +0.7† | 2.2† | 2.5† | +3.8† | 204† | 0.84 | +19.4 |
| United Kingdom | +0.8† | +0.8† | 3.2† | 5.6† | -3.4† | 104† | 0.25† | +10.1 |
| France | +0.9† | +0.9† | 1.8† | 7.9† | -0.3† | 118† | 2.25 | +3.6 |
| India | +7.6† | +6.5† | 4.7† | 4.9† | -2.0† | 83† | 5.50† | -8.5 |
| Brazil | +2.3† | +1.9† | 4.0† | 6.8† | -2.7† | 96† | 14.39 | +8.3 |
| Canada | +1.5† | +1.5† | 2.5† | 6.5† | -0.2† | 111† | 2.27 | +10.8 |
| Australia | +2.0† | +2.0† | 4.0† | 4.2† | -2.3† | 51† | 4.35 | +2.8 |
| South Korea | N/A | N/A | N/A | N/A | N/A | N/A | 2.54 | +29.8 |
| Italy | +5.2† | +5.2† | 2.5† | 4.7† | -0.8† | 42† | 2.25 | +14.1 |
| Economy | GDP % Actual | GDP % Forecast | CPI % | Unemp % | Curr Acct % GDP | Govt Debt % GDP | Policy Rate % | Stock YTD % |
|---|---|---|---|---|---|---|---|---|
| Mexico | +0.6† | +1.6 | 3.9† | 2.7† | -0.4 | 63 | N/A | N/A |
| Indonesia | +5.1† | +5.0 | 3.0† | 4.8† | -1.1 | 42 | N/A | N/A |
| Turkey | +3.6† | +3.4 | 28.6† | 8.3† | -2.8 | 26 | N/A | N/A |
| South Africa | +1.1† | +1.0 | 3.9† | 32.5† | -0.9 | 79 | N/A | N/A |
| Poland | +3.6† | +3.3 | 3.3† | 3.4† | -1.1 | 66 | N/A | N/A |
| Thailand | +2.4† | +1.5 | 0.9† | 1.0† | +0.7 | 67 | N/A | N/A |
| Saudi Arabia | +4.5† | +3.1 | 2.3† | 3.5† | -1.6 | 32 | N/A | N/A |
| Taiwan | +8.7† | +5.2 | 1.5† | 3.4† | +18.1 | 28 | N/A | N/A |
| Economy | GDP % Actual | GDP % Forecast | CPI % | Unemp % | Curr Acct % GDP | Govt Debt % GDP | Policy Rate % | Stock YTD % |
|---|---|---|---|---|---|---|---|---|
| Nigeria | +4.0† | +4.1 | 16.0† | 22.6† | +5.8 | 32 | N/A | N/A |
| Vietnam | +8.0† | +7.1 | 4.9† | 2.1† | +5.3 | 30 | N/A | N/A |
| Bangladesh | +3.5† | +4.7 | 9.2† | 4.5† | -0.6 | 42 | N/A | N/A |
| Kenya | +4.9† | +4.5 | 5.9† | 2.5† | -4.1 | 72 | N/A | N/A |
| Egypt | +4.4† | +4.2 | 13.2† | 7.4† | -4.2 | 87 | N/A | N/A |
| Pakistan | +3.1† | +3.6 | 7.2† | 6.9† | -0.4 | 70 | N/A | N/A |
25 of 26 economies have full GDP data this issue. A † marks a figure older than that basket’s freshness window (windows widen for Emerging Markets and Developing, which report on a longer lag); N/A means not reported. Sources: FRED · OECD SDMX · IMF WEO.
Rotating spotlight — this week: Japan
Japan: the economy grew at 0.7% (most recent reading), inflation is running at 2.2%, unemployment stands at 2.5%, the central bank's policy rate is 0.84%, government debt is 204% of GDP. The local stock market has gained 19.4% 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.”