Balancing Act: Global Economy Walks Tightrope into Q3 Amid Stagflation Risk

Dun & Bradstreet’s Q3 Global Economic Outlook Report reveals a fragmented macroeconomic landscape facing persistent inflation and shifting supply chains 

• Global Growth Slows Amid Rising Economic Fragmentation: After a post-pandemic rebound, the global economy is experiencing a marked deceleration as supply chains shift and investors remain cautious amid tightening credit conditions, persistent inflation and a new trade landscape. 

• External Shocks Test Resilience: The global economy exhibits resilience in early Q3, but it remains vulnerable to disruption from policy missteps and geopolitical tensions. 

• Downside Risks Cloud the Economic Outlook: The potential for further trade fragmentation, resurgent inflation, growing fiscal strains and other macroeconomic vulnerabilities dominate Dun & Bradstreet’s country risk ratings. 

The global economy remains resilient in early Q3, but its stability is becoming increasingly fragile amid continuing trade tensions and geopolitical uncertainties, with Dun & Bradstreet’s sectoral risk ratings indicating elevated pressures across key sectors. Cautious investment patterns and supply chain realignment mean industries that rely heavily on cross-border trade, production or commodity inputs, such as manufacturing, face price volatility and increased credit and operational risks. Economies with export-driven growth, especially in Asia and Europe, are particularly vulnerable as the August 1 deadline for U.S. trade negotiations nears. For them, tariffs could mean exporting goods below their normal market values or transitioning exports away from the U.S., possibly contributing to further market dislocation, less competition and more protectionist measures. However, some sectors are enjoying relative stability, notably those tied to essential goods and services.

Meanwhile, geopolitical friction in the Middle East has deepened economic uncertainty for businesses already grappling with shifting supply chains. Escalation between Iran and Israel in June led to a temporary spike in energy prices and renewed volatility in shipping costs, delaying disinflation in several economies and introducing new risks into central banks’ interest rate calculations.

Inflation remains uneven but continues to hover above central bank targets, particularly in advanced economies. Diverging monetary policies — for example, between the European Central Bank, which has begun to loosen monetary policy, and the U.S. Federal Reserve, which remains cautious — are creating volatility in financial markets, especially in currency markets and cross-border capital flows. Emerging markets face both exchange rate and imported inflation pressures. Global institutions such as the World Trade Organization and International Monetary Fund are increasingly sidelined as governments pursue their own trade and fiscal strategies, reducing policy predictability and contributing to weakening business planning. Consumer sentiment is also softening in several major economies, especially in areas negatively impacted by price pressures and policy changes. In Q3, the global economy is at risk of a cycle of weak growth and stubborn inflation: stagflation. 

“The global economy walks a tightrope. It is resilient now but increasingly vulnerable to external shocks and policy missteps,” said Dr. Arun Singh, Global Chief Economist, Dun & Bradstreet. 

Q3 2025 Global Business Optimism Insights

Dun & Bradstreet’s quarterly Global Business Optimism Insights Report leverages a survey of ~10,000 global business leaders, propriety data and economic expertise to gauge overall business optimism, as well as expectations about supply chain continuity, financial and investment conditions and ESG initiatives.

• The Global Business Optimism Index declined 6.5% from the previous quarter. Businesses are pivoting to local markets or diversifying away from the U.S., though tariff-exempt trade partners such as Mexico and Canada remain resilient. Overall, emerging economies showed more domestic confidence than advanced economies, while sectors tied to U.S. trade, such as metals and automotives, saw steep declines. 

• The Global Business Supply Chain Continuity Index saw a 9.7% decline for Q3 2025, contributing to an 18.6% drop year-to-date. Widespread negative outlook reported from both advanced and emerging economies suggest systemic global supply chain challenges. 

• The Global Business Financial Confidence Index fell 3.4%, reflecting a worsening macroeconomic environment. Fewer than half of businesses expect to receive timely payments, suggesting that businesses are managing working capital more tightly.

• The Global Business Investment Confidence Index declined 13.1%, the sharpest drop since the survey began in 2023. The rolling back of investment plans appears poised to continue, with nearly half of businesses expecting that they will not raise long-term funding during Q3 2025. 

• The Global Business ESG Index, which captures ESG sentiment, remained steady, but revealed sharp contrasts. Medium-sized businesses, particularly in emerging economies, posted strong ESG gains, while large businesses in advanced economies saw declines — likely reflecting compliance strain and evolving disclosure requirements. With trade-linked ESG scrutiny rising, adaptability is emerging as a key differentiator in global sustainability performance.