Goldman Sees AI Lifting US Core PCE 50 Bps by Year-End, Outpacing 10-Bp Global Peers
Updated
Updated · Business Insider · Jul 11
Goldman Sees AI Lifting US Core PCE 50 Bps by Year-End, Outpacing 10-Bp Global Peers
3 articles · Updated · Business Insider · Jul 11
Summary
50 basis points of added US core PCE inflation could come from AI by year-end, Goldman Sachs said, more than double its current estimated 20-basis-point annual lift.
Memory chips, software bundles and electricity are driving that pressure as AI demand collides with supply constraints, making the inflation hit far larger in the US than in other developed economies.
DDR5 memory prices reached about $148 for an 8 GB module last week, versus $35 a year earlier, and Goldman expects US software and accessories inflation to hit 30% year over year in November.
$0.19 per kilowatt-hour US city electricity prices in May were up 27% from May 2022, while data centers are projected to consume 11% of US power demand by decade-end, up from 6% now.
Goldman said Canada, Australia, Europe, the UK and Japan will see only about a 10-basis-point core inflation bump on average, though it still expects AI to turn disinflationary over the longer run.
Why is America facing an 'AI inflation' crisis while the rest of the developed world is largely immune?
Is the global race for AI chips creating a hidden supply crisis that will raise prices for all electronics?
AI Fuels 0.5% Surge in US Inflation: Why America’s Economy Is Running Hot Despite Elusive Productivity Gains
Overview
The rapid advancement and deployment of Artificial Intelligence (AI) is driving a distinct and uneven inflationary surge in the United States. Massive investments in AI are keeping the economic cycle active, but this is creating persistent structural inflation. Central banks are responding with caution, as projections show AI could add 0.5 percentage points to US core inflation by the end of 2026. This inflationary pressure limits the Federal Reserve’s ability to cut interest rates and challenges previous beliefs that AI would mainly lower prices. As a result, policymakers must reconsider their strategies in this new economic landscape.