Investing.com — Strong U.S. macroeconomic performance continues to outpace other developed economies, powered by real GDP growth tracking at a 2% to 3% pace in recent quarters, according to institutional research released by Citi this week.
Data indicates that roughly half of this expansion stems from consumer spending, while the remaining half is driven directly by artificial intelligence-related investment.
AI-related capital expenditure has surged by more than 1.5 percentage points as a share of real GDP over the last two years.
However, this leaves the domestic economy increasingly vulnerable to any deceleration in the tech buildout.
Citi warns that if investment in these categories reverts to its historical trend, U.S. real GDP growth could fall below 1% or turn negative, while subsequent equity market declines could further drag on consumer spending.
Conversely, the AI infrastructure buildout has not generated excessive job creation.
Because market concerns have primarily focused on AI reducing labor demand, a tech-driven downturn in real GDP may exert a more limited negative impact on employment than a typical economic contraction.
On the inflation front, April’s Consumer Price Index (CPI) reflected surging prices for specific tech components, such as memory hardware, where supply constraints have collided with high demand.
While the “Computer Software and Accessories” category in the CPI captures the price spikes, it applies a minimal weight based strictly on direct consumer spending.
In contrast, the Personal Consumption Expenditures (PCE) price index magnifies the price surge effect by utilizing the hardware spikes to proxy for broader consumer technology goods and services whose prices are not rising as rapidly.
This technical discrepancy frames a key question for newly sworn-in Federal Reserve Chair Kevin Warsh ahead of the June Federal Open Market Committee (FOMC) meeting.
Warsh, who officially took the oath of office this week, has previously favored alternative metrics like trimmed-mean PCE, which strip out volatile components to isolate underlying inflation trends.
Monetary policy parameters are already shifting under the new leadership.
Remarks from Fed Governor Christopher Waller this week all but confirmed that the central bank will remove its implicit easing bias from the policy statement at the upcoming June meeting.
Chair Warsh is expected to treat the adjustment as a structural move toward providing less forward guidance to financial markets. Meanwhile, high-frequency labor data showed that initial jobless claims remain low, leaving the broader economic outlook unchanged.
