October 2026 update to TIGER: A modest recovery built on shaky foundations

Select a country below the Composite Index to view charts for the main TIGER indexes by country and charts for the indicators that make up the indexes, which are broken down by real activity, financial, and confidence indicators for advanced economies and emerging markets.

The U.S. economy continues to drive global growth, undeterred by high energy prices and rising government bond yields that have made credit broadly more expensive. Inflation has stayed stubbornly above the Fed’s target, but long-term inflation expectations are still well anchored despite mounting unease about the U.S. fiscal trajectory as federal budget deficits and debt keep rising. Business investment, driven by AI-related capital expenditures, has continued to expand, and so has household consumption, despite signs of a softening labor market. With inflation edging down and cooler job growth easing wage pressures, the Fed is less constrained by its price stability mandate, barring further energy shocks.

The eurozone remains beset by economic and political malaise. High energy costs and the onslaught of Chinese exports have restrained manufacturing growth in the core eurozone economies, even as some of the smaller and periphery economies in the zone are performing better. Rising budget deficits and public debt levels, lagging competitiveness of high-tech industries, and vulnerability to energy and other supply disruptions have put a pall on the region’s growth prospects, with populist political pressures adding to the turmoil.

Political instability and a fiscal squeeze have contributed to the UK economy remaining mired in low growth, with industrial production declining and the unemployment rate ticking up to near 2021 levels. Japan has turned the corner from a long period of stagnation and deflation, with inflation hovering near 2% and GDP growth positive but weak. High public debt levels, a shrinking labor force, and weak productivity growth have battered the yen’s value amid concerns about longer-term fiscal sustainability and elusive drivers of growth. Canada is likely to be hit hard by the trade war with the United States. Prime Minister Mark Carney’s attempts to fortify trade relationships with other countries are emblematic of how even longstanding U.S. allies are seeking to mitigate vulnerabilities resulting from close economic, trade, and military relationships with the U.S.

China’s economy continues to grow in an unbalanced manner, with output expanding at a slower rate than in 2025 but still outstripping domestic demand, as nominal retail sales lag and consumer confidence remains depressed. With a partial easing of China-U.S. trade tensions and limited pushback from other trading partners, Beijing will likely continue to rely on exports to power growth. The newly announced infrastructure plan will lift public sector investment and may hasten technological upgrading of the manufacturing sector, but the government has shown little urgency to boost household consumption or undertake reforms that would help rebalance growth.

India stands out as a bright spot, with its economy firing on all cylinders. High oil prices, a weakening currency, and falling stock prices could take some of the shine off in the period ahead, but structural and fiscal reforms seem to be paying off in the economy’s greater resilience to an unfavorable external environment. Strong growth in industrial production, household consumption, and exports contributed to real GDP growth of nearly 8% in the first half of this calendar year.

Indonesia and, to a lesser extent, Brazil are experiencing robust GDP growth, although political instability remains a wild card in both countries. Argentina has become a noteworthy example of a country where the fiscal contraction needed to shift from an overall budget deficit to a small surplus, in tandem with a set of market-oriented reforms, has helped bring down inflation and boost growth. Despite high oil prices, Western financial sanctions and the costs of the war with Ukraine have kept the Russian economy on its knees.

The key challenge that policymakers around the world face is their shrinking room to maneuver as persistently high inflation and fiscal profligacy result in elevated yields on government debt securities, with both factors dampening private demand. Constraints on monetary and fiscal policies leave governments with little choice but to push forward with structural reforms to labor, product, and financial markets that could help unleash productivity growth, which is the only viable path to fiscal sustainability and long-run prosperity.