Global businesses are heading into the final months of 2026 facing a difficult balancing act: maintaining growth while managing higher energy prices, supply chain disruptions and uncertainty surrounding international trade.
Manufacturing activity has remained relatively resilient across several major economies, but rising input costs are putting pressure on companies’ profit margins. Businesses are also navigating an environment in which consumers face higher living expenses, potentially limiting their ability to absorb further price increases.
The challenge is becoming increasingly visible across global markets. While demand has held up in some industries, companies are having to reassess operating expenses, sourcing strategies and investment plans as economic conditions remain uncertain.
Manufacturing Growth Holds Up Despite Rising Costs
Recent purchasing managers’ index (PMI) data indicate that manufacturing activity continued to expand across several major economies in October. However, the underlying figures show that companies are facing mounting cost pressures.
The euro zone’s manufacturing PMI, compiled by S&P Global, eased to 52.7 in October from 52.9 in September. Although the reading indicated continued expansion, input prices increased at their fastest pace since May, while output prices also rose rapidly.
Readings above 50 indicate expansion, meaning the euro zone’s manufacturing sector remained in growth territory despite the slight decline.
Conditions varied across individual economies. Germany recorded solid manufacturing expansion, while France returned to contraction. British manufacturers, meanwhile, began the final quarter with their strongest output growth in more than two years, although rising costs remained a concern.
Across Asia, factory activity also expanded, but growth slowed in China, Japan, South Korea and Taiwan. India experienced slower manufacturing growth as domestic demand and hiring weakened, although stronger export orders provided some support.
These developments suggest that manufacturers are still finding opportunities to grow, but maintaining that momentum could become more difficult if energy and raw material costs continue to rise.
Energy Prices and Supply Disruptions Squeeze Margins
One of the biggest challenges facing businesses is the continued impact of geopolitical tensions on energy markets and international supply chains.
The prolonged conflict in the Middle East has contributed to higher fuel and food prices, affecting both businesses and consumers. Companies that depend heavily on transportation, manufacturing inputs and international shipping are particularly exposed to these developments.
Higher energy costs can affect businesses well beyond their direct fuel expenses. Increased transportation charges, supplier prices and insurance costs can gradually raise the total cost of producing and delivering goods.
According to Dun & Bradstreet’s fourth-quarter 2026 economic outlook, these pressures are increasingly passing through supplier pricing, transportation contracts and the costs of bringing goods into markets. The report also identifies tighter financing conditions and supply chain uncertainty as additional challenges for companies.
For businesses operating with narrow profit margins, absorbing these increases can become difficult. Raising prices may help protect profitability, but it also risks discouraging customers who are already dealing with higher household expenses.
Trade Uncertainty Adds to Business Challenges
Companies are also navigating an uncertain international trade environment, particularly as existing tariffs and geopolitical tensions continue to influence business decisions.
In a November 4 Reuters report, executives from several global companies said the Democratic Party’s gains in the US midterm elections were unlikely to provide immediate relief from higher operating costs and trade-related uncertainty.
Some business leaders welcomed the possibility of greater political stability. However, companies remained cautious about expecting significant changes to existing tariffs in the near term.
Andrew Adair, a trade policy adviser for North America at German machinery association VDMA, told Reuters that existing tariffs had largely been implemented through executive authorities. This means Congress would face significant political obstacles in attempting to reverse them, including the possibility of a presidential veto.
Japanese trading company Mitsui also highlighted uncertainty surrounding US policies on tariffs, critical minerals and AI data center development.
For multinational businesses, these developments make long-term planning more complicated. Companies must consider not only production costs and customer demand but also the possibility that changes in trade policy could affect sourcing decisions, supplier relationships and access to important markets.
Companies Focus on Resilience and Cost Management
With several pressures developing simultaneously, businesses are placing greater emphasis on managing costs and strengthening their operations.
Dun & Bradstreet’s fourth-quarter outlook identifies refinancing requirements, working capital management, supplier pricing and transportation costs as important areas for companies to monitor. Businesses with substantial debt obligations, long cash conversion cycles or significant capital investment requirements may face additional pressure as financing conditions tighten.
Supply chain visibility is another priority. Companies increasingly need to understand risks beyond their immediate suppliers, particularly when disruptions can affect multiple stages of production and distribution.
Potential responses include diversifying supplier networks, reassessing inventory levels and identifying alternative sourcing markets. These measures can help companies reduce exposure to disruptions, although they may require additional investment.
Other businesses may prioritize operational improvements that reduce expenses and make better use of existing resources. Such adjustments can help protect margins, particularly when higher costs cannot easily be passed on to customers.
Business Outlook Remains Uneven Heading Into 2027
The global manufacturing sector has demonstrated resilience, but continued expansion does not necessarily mean businesses are operating without difficulty.
Higher input costs, trade uncertainty and tighter financing conditions could continue to influence corporate earnings and investment decisions in the months ahead. Companies that cannot pass rising expenses on to customers may face greater pressure on their profit margins.
At the same time, businesses with flexible supply chains, stronger balance sheets and effective cost controls may be better positioned to navigate the uncertain environment.
Looking ahead to 2027, companies will need to balance growth ambitions with the need to protect profitability, manage financing requirements and prepare for further supply chain disruptions.