Global economic activity shows a modest but broad-based improvement at the start of 2026, with demand strengthening across sectors and regions even as business confidence and hiring remain subdued. The latest purchasing managers’ index (PMI) data point to a year that begins with firmer output and pricing pressure but continued uncertainty around labour markets, inflation and the path of interest rates.

The J.P.Morgan Global Composite PMI Output Index rises to 52.5 in January from 52.0 in December, signalling an acceleration in global expansion and marking the 36th consecutive month above the neutral 50 level. Output and new orders both pick up, while employment edges higher after stagnating at the end of last year. Yet business optimism falls to a three-month low and remains below long-run averages in several major economies.

Maia Crook, global economist at J.P.Morgan, says the data suggest steady underlying growth but a more complex outlook beneath the surface. “The J.P. Morgan global composite output PMI rose 0.5-point in January, recovering much of December’s drop and continuing to signal above-trend GDP growth. New orders and export business indexes also improved, approaching recent highs, an encouraging sign of underlying market demand. This constructive growth picture contrasts with a still-depressed future output index and a near-stagnant employment PMI, suggesting the odd decoupling of GDP growth from business sentiment and labor demand continued into the new year. Also, a jump in the US manufacturing output price index is a reminder of the Fed’s challenge in cutting rates further.”

For treasury teams, that combination of improving demand and cautious sentiment creates a mixed planning environment. Stronger order books support revenue forecasts and cash generation, but subdued hiring and fragile confidence suggest companies remain wary of committing to large expansions or capital deployment.

Demand strengthens but labour remains muted

The improvement in global output is underpinned by faster growth in new orders across both manufacturing and services. Five of the six sub-industries tracked see stronger demand, with only investment goods registering a decline in new work. Financial services records the fastest overall growth in January, while intermediate goods producers lag behind.

Employment trends, however, remain subdued. The global employment index remains near the neutral mark for more than 18 months, indicating only marginal changes in staffing levels. Hiring increases in the US, mainland China, Japan and India are offset by declines in Germany, Brazil and the UK.

For finance leaders, this divergence between demand and hiring carries implications for productivity and cost control. Firms appear to be relying on existing workforces and efficiency measures rather than aggressively expanding headcount. That may support margins in the short term but could limit capacity if demand continues to strengthen.

Pricing signals add further complexity. Average input cost inflation eases to a three-month low in January, offering some relief on the cost side. At the same time, output charges rise at the fastest pace since August 2025, suggesting firms are regaining some pricing power. Both measures remain above their long-run averages, pointing to a persistent inflation backdrop.

This environment complicates interest rate expectations. Easing input costs may support the case for gradual policy loosening, but stronger selling prices and pockets of sector-specific inflation could slow the pace of rate cuts in some markets.

Regional momentum shifts

The pattern of global growth also shifts in January. After leading developed-market expansion for much of the second half of last year, the US cedes the top position. Growth across developed economies is instead led by Australia, followed by the UK and Japan. Expansion in these markets is accelerating at its fastest pace in several months.

The US continues to grow, but at a slower rate relative to peers. The eurozone sees only modest expansion, while emerging markets record a slight pickup overall. India remains the strongest performer among emerging economies, with mainland China and Russia also expanding modestly. Brazil, by contrast, sees growth stall.

The changing regional landscape reinforces the need for flexible liquidity planning and currency risk management at multinational corporates. Faster growth in the UK and parts of Asia may support local revenue and investment opportunities, while weaker momentum in the eurozone and Brazil may warrant more cautious capital allocation.

Regional divergence also affects funding conditions and pricing strategies. Stronger demand in some markets may support higher selling prices and improved margins, while slower-growing regions may require tighter cost control and working capital discipline.

Sector picture: services and financials lead

Elsewhere, the S&P Global Sector PMI data for January paint a similarly mixed but generally improving picture. Expansions are recorded in 18 of the 21 sectors tracked, with contractions confined to manufacturing-focused industries including metals and mining, autos and construction materials. Even in those sectors, declines are marginal overall.

Telecommunications services retain the lead among broad sectors and record their fastest upturn since May last year. Healthcare services posts the strongest growth in new business across all sectors, marking its fifth consecutive monthly rise in demand and the fastest increase in more than four years. Healthcare also leads in job creation, despite a slight slowdown from December’s recent peak.

Financials regain momentum after slipping in December, driven largely by a rebound in the “other financials” category, which includes financial and investment services. This segment is the only part of the broader financials grouping to record employment growth in January.

Basic materials returns to growth but remains near the bottom of the rankings, while consumer goods also lags. Real estate records the steepest decline in employment among sectors cutting staff.

Price pressures vary widely. Autos companies report a sharp rise in operating expenses, with sector-wide inflation reaching a more than three-year high. Software and services firms prove the most aggressive in raising prices, with output inflation reaching its strongest level since April 2024.

For corporate treasurers, these sector dynamics matter for forecasting and risk management. Stronger activity in financials and services may support stable cash flows in those industries, while ongoing weakness in some manufacturing segments could weigh on supply chains and capital expenditure.

Rising costs in autos and technology-related sectors may affect pricing and margin expectations, in turn altering procurement strategies and contract negotiations. At the same time, renewed pricing power in some areas may help firms offset higher wage and financing costs.

Opportunity with caveats

Taken together, the January PMI data point to a global economy that is expanding modestly but unevenly. Demand is improving, pricing power is returning in parts of the economy and services activity remains resilient. Yet confidence is fragile, hiring is subdued and inflation pressures persist in key sectors.

For treasury and finance teams, this environment requires careful balance. Stronger new orders and output support revenue and cash-flow forecasts, but uneven regional and sector performance complicates planning. Persistent cost pressures and uncertain rate paths make funding and hedging decisions more complex.

Liquidity management remains a priority. Firms may seek to maintain higher cash buffers or flexible credit lines if confidence weakens or growth slows. Working capital strategies may also need adjustment, particularly where demand is improving but hiring and investment remain cautious.

Pricing dynamics are another key consideration. As companies regain the ability to pass on higher costs, treasurers will need to monitor the impact on margins, customer demand and competitive positioning. Inflation that is uneven across sectors and regions may create both risks and opportunities.

Interest rate expectations will continue to shape financing strategies. While easing input costs and moderate growth may support gradual rate cuts in some markets, stronger output prices and resilient demand could slow the pace of policy loosening elsewhere. That uncertainty reinforces the value of diversified funding and hedging approaches.

Navigating the early-year outlook

The first PMI readings of 2026 suggest the global economy is entering the year with modest momentum. Output and demand are improving, and sector growth is broad-based. Yet business sentiment remains cautious and labour markets are not strengthening in line with activity.

The message is one of steady expansion rather than a decisive upswing. Growth is present, but uneven and accompanied by persistent inflationary pressures and policy uncertainty.

That combination is likely to define the early months of 2026: an environment where demand holds up, costs remain a concern and confidence takes time to recover. For treasurers, navigating that landscape will require flexibility in liquidity, funding and risk management as the global cycle continues to evolve.