Global PulsePoint

Executive Summary 

4 February, 2026 - This update captures trends through December 2025 including key developments through 30 January 2026.

The global economy enters 2026 having moved beyond the inflation shock phase and into a period defined by structural adaptation. Price pressures have eased across most advanced economies, but growth remains constrained by policy capacity, fiscal credibility and a more fragmented global operating environment.

What changed over the past quarter is not the level of friction, but how firms and governments are responding to it. What began in late 2025 as episodic disruption is now being absorbed into permanent operating assumptions. Capital allocation, supply chain design and market prioritisation are being restructured around durability rather than speed.

Europe has delivered the clearest stabilisation signal. Euro area inflation for December 2025 came in below 2 percent on the final release, and the European Central Bank held policy rates unchanged. This provides a comparatively predictable macro backdrop, even as growth remains modest. The United Kingdom remains an outlier, with inflation re-accelerating at year-end despite a continued easing of monetary policy. In the United States, inflation has cooled shifting the policy focus from price stabilisation to the pace and sequencing of rate cuts. China met its 2025 growth target, but momentum slowed into year-end and policy remains oriented toward stabilisation rather than expansion.

The most strategically significant development this period is the conclusion of negotiations on the EU–India Free Trade Agreement on 27 January 2026. This does not represent an immediate commercial inflection point. As with all EU trade agreements the deal must now proceed through legal finalisation, signature, ratification and phased implementation before economic benefits materialise. Its significance lies in locking in future access and regulatory alignment within an increasingly bloc-based global trade system.

Recent geopolitical and diplomatic activity, including renewed engagement channels with China and heightened strategic focus on regions such as the Arctic, reinforces the same underlying reality. Governments are adjusting tactics, not reversing the structure of managed competition. Firms are responding accordingly.

Signals to watch in February

• Inflation persistence versus easing paths: Euro area disinflation is most advanced; the UK faces a tougher final stage; the US focus has shifted to timing rather than direction of cuts.
• ECB decision point (5 February): With inflation easing and growth modest the ECB’s next policy decision will test how firmly it remains in a hold-and-assess stance as the tightening phase ends.
• China demand composition: Watch whether domestic consumption and property stabilise sufficiently to reduce reliance on policy support.
• EU–India implementation pathway: Progress on legal approval, provisional application, and sectoral sequencing will determine when firms can begin to plan against concrete rule changes.
• Policy continuity risk: Jurisdictions with recurring fiscal or regulatory cliff edges continue to embed a premium into investment and supplier decisions.

Market Dynamics / Where sentiment, risk & hiring are showing up

Strategic Signal - January/February 2026:

The Resilience Premium Is Now Structural

The defining shift is no longer the presence of friction but the acceptance of it as permanent. Capital is no longer optimising primarily for cost or speed. It is optimising for continuity of access, regulatory predictability and policy execution. This resilience premium is now embedded in hurdle rates, location choices and supply-chain architecture. For boards resilience is no longer a contingency plan. It is a balance-sheet issue.

Financial Conditions

The bottom line:

Lower inflation has eased financial conditions but the benefit is conditional. Where regulatory stability and trade access are predictable easing supports investment. Where policy uncertainty persists lower rates are offset by higher risk premia. The divergence is becoming structural.

Labour Market

The bottom line:

Labour market tightness is easing gradually across advanced economies though conditions remain uneven by sector and skill type. Hiring momentum has softened but wage and services inflation continue to limit how quickly labour conditions can normalise particularly in the United Kingdom. The adjustment remains orderly but tolerance for further slack is politically constrained.

Productivity

The bottom line:

Productivity trends continue to show notable divergence. The US remains the global leader, with output per hour worked rising to 81.8 USD, driven by advances in automation and sustained investment in workforce skills. The Eurozone improved to 71.32 USD, reflecting modest gains but still constrained by structural inefficiencies and uneven progress among member states. In the UK, productivity grew slightly to 69.49 USD, underscoring persistent stagnation tied to limited investment and economic uncertainty.

Meanwhile, China’s increase to 19.77 USD highlights incremental progress fuelled by industrial upgrades, though structural challenges like an aging workforce and capital inefficiencies continue to weigh on long-term potential. These patterns underscore the uneven pace of global productivity growth, shaped by technological advancement and regional disparities.

Source: Ibec Global original chart based on the estimates from the International Labour Organisation (ILO).

CEO Sentiment & Strategic Priorities

The bottom line:

Executive confidence has stabilised but ambition has narrowed. Leaders are prioritising fewer markets, deeper positions and longer time horizons. Investment decisions are increasingly filtered through questions of regulatory durability, geopolitical exposure and operational continuity rather than near-term demand projections. Strategy is becoming more deliberate in design, even as footprint expansion slows. 

Spotlight Insight / Geopolitics

Managed Competition Becomes the Operating Norm

Recent geopolitical developments, from increased strategic focus on the Arctic to renewed engagement efforts with China by advanced economies point to tactical recalibration rather than structural reversal. Governments are seeking to stabilise risk at the margins without dismantling the framework of strategic competition that now defines the global system. Dialogue reduces tail risk but it does not restore frictionless integration. Strategy should be built on the assumption that selective engagement, overlapping blocs and conditional access are enduring features of the landscape.