Page 9 - Policy Economic Report -August 2026

POLICY AND ECONOMIC
OIL & GAS MARKET

Economy in Focus

1. A snapshot of the global economy
Global Economic Outlook

The global economy continued to display considerable resilience during August 2026 despite persistent
geopolitical tensions, elevated energy-market uncertainty and continued disruption to global trade and
supply chains. Stronger-than-expected economic activity during the second quarter, particularly in
Western Europe, together with renewed momentum in services and continued investment in artificial
intelligence and technology, has helped offset some of the adverse effects of geopolitical shocks.
Nevertheless, the recovery remains uneven across economies, with weak domestic demand, fiscal
constraints and higher energy costs continuing to weigh on several regions. S&P Global ‘s August
assessment notes that global economic conditions have proved more resilient than anticipated, although
the 2026 global real GDP growth forecast remains below the pre-conflict projection.

A notable feature of the current global outlook is the increasing contribution of technology and artificial
intelligence-related investment to economic activity. Investment in AI infrastructure, data centres,
semiconductors and technology equipment has supported capital expenditure and manufacturing activity
across several economies, particularly in Asia. The technology investment cycle has also contributed to
stronger trade in high-value equipment and helped cushion the impact of weaker demand in some
traditional sectors. At the same time, the benefits remain unevenly distributed, with economies
integrated into technology-intensive global value chains gaining more strongly from the current
investment cycle.

Business activity also improved during the summer months. S&P Global's Flash PMI surveys for August
showed that activity across the four largest advanced economies—the United States, Eurozone, United
Kingdom and Japan—accelerated to its fastest pace since April 2022. The improvement reflects a shift in
the composition of growth: manufacturing had been the principal source of momentum during the second
quarter as firms built precautionary inventories, whereas services have become the stronger driver as
energy-price pressures eased and consumer confidence recovered.

However, the improvement remains vulnerable to renewed shocks. Supplier delivery times across the G4
economies lengthened again in August, while renewed increases in crude oil prices and the possibility of
further geopolitical escalation could revive inflationary pressures. Tighter financial conditions, weaker
business confidence and the fading of temporary factors such as precautionary inventory accumulation
and event-related services demand could also moderate the pace of expansion during the remainder of
the year.

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