AI boom is translating into higher inflation, says Point 72's Dean Maki

Summary

Dean Maki, Chief Economist at Point 72, discusses a clear slowdown in real consumer spending driven by negative real wage growth due to persistent inflation. Meanwhile, AI-related investment in equipment and intellectual property remains the only growing sector, but much of it is imported and it is contributing to higher inflation, complicating the economic outlook and Fed policy.

• Real consumer spending growth has slowed from 2.5-3.5% to 1.5-2% and is expected to slow further in Q2.
• Real wage and salary income growth turned negative in Q1 and is expected to stay negative through H1 due to inflation.
• AI-related equipment and intellectual property spending is the only category not slowing in the economy.
• A significant portion of AI equipment spending is on imports, limiting its contribution to GDP growth.
• Information processing equipment prices rose 8.6% year-over-year in the PCE index, indicating AI-driven inflation.
• The economy is not contracting but experiencing a noticeable slowdown outside of AI-related sectors.