Now that the first half of 2026 is taking shape with solid (if uneven) economic momentum, a number of economists are sounding a warning note: Global growth may decelerate significantly in the second half of this year. Though the world skirted a recession in 2024 and rebounded tepidly last year, several structural forces are taking shape on the horizon that could weigh significantly on economic performance in coming months.
The first big difference is stubborn inflation that refuses to return to pre-pandemic levels. While headline inflation has eased, core inflation remains stubborn in certain segments — particularly housing, insurance, transportation and services. Central banks from the U.S. and Europe to parts of Asia are trimming rates cautiously with concerns that easing too much, too quickly might reheat inflationary pressure.
This caution implies that borrowing costs are probably going to stay elevated for longer. At the household level, higher rates mean tighter disposable income. For businesses, they limit appetite for investment, hiring and expansion. The two effects combine to slow the economy.
A second factor contributing to the anticipated slowing is diminished worldwide demand for manufacturing. Though consumer spending has proved surprisingly resilient, manufacturing and exports have been showing signs of wear. Larger economies, including Germany, Japan and South Korea, have posted falling factory out aerospace and other high-end metals for the last few months amid weakened demand for electronics, automobiles and industrial equipment.
The slowdown in China is also adding to global uncertainty. Beijing has tried multiple times to offer stimulus without great success. The country’s property market is still fragile, its youth unemployment rate is high and external demand for Chinese goods remains volatile. Weakness in China — which is the world’s manufacturing hub — almost always spills over into global supply chains and trade flows.
There is also an increase in corporate refinancing pressure. Debt maturities that could possibly arise in late 2026 and 2027 span in the thousands of companies. Refinancing that debt at far higher interest rates could force cost-cutting, layoffs or less investment. Economists call this a “refinancing wall” that will affect economic activity for years.
And there is also geopolitical tension casting an additional element of uncertainty. Trade wars, sanctions, resource wars and regional conflicts have left pockets of volatility. When companies see uncertainty on a global horizon, they are likely to put off hiring, cut back on inventories and limit capital spending — all forces working against growth.
Despite these dangers, all is not lost. Artificial intelligence-led productivity enhancements, tight job markets in a number of the world’s advanced economies and increased investment in clean energy and digital infrastructure could provide some support for growth. But the movement from below ground to above ground among analysts is unmistakable: they believe the second half of 2026 will feel slower, softer and more hesitant than the first.
For policy makers, the task will be to steer a middle way between containing inflation and providing supports for growth. For businesses, the emphasis will be resilience, efficiency and prudent financial planning. And for consumers, there may be a more measured — and costly — set of economic conditions in the next six months.
