Global growth is losing pace as war‑driven energy shocks push inflation higher across major economies. Rising costs are forcing companies to either absorb losses or pass the burden to consumers. Policymakers now face the difficult task of balancing inflation control with fragile expansion.
Europe is showing the sharpest contraction. Factory activity in France and Germany has weakened, while eurozone business output fell at the fastest rate in more than two years. The United States recorded its strongest factory activity in four years due to stockpiling, but input prices touched the highest level since mid‑2022.
India and Japan remain relatively resilient, with manufacturing still expanding though at a slower pace. Australia is struggling as factory output nearly stalled and services contracted, pushing sentiment to pandemic‑era lows. The United Kingdom reported its first decline in business output in over a year, worsened by political uncertainty.
Central banks are under pressure to raise interest rates to contain inflation, but tighter policy risks deepening the slowdown. Bond yields have surged to twenty‑year highs as investors brace for further monetary tightening. Economists warn of stagflation, where weak growth combines with high inflation.
If the conflict continues, shortages may spread further, hitting demand worldwide. India remains stronger compared to peers, but rising energy costs could weigh on growth in the coming months.
