AI has stalled as a key driver for GDP.
GDPNow Percentage Point Contribution Estimates
- PCE Goods: 0.17
- PCE Services: 1.47
- PCE Nonresidential Equipment: 0.13
- Intellectual Property: 0.31
- Nonresidential Structures: -0.05
- Residential Investment: 0.00
- Federal Government: 0.07
- State and Local Government: 0.17
- Imports: 0.52
- Export: 0.10
- CIPI: 0.69
Three Key Notes
- The above numbers represent expected changes vs the BEA reported third-quarter 2025 GDP contributions.
- Intellectual property plus nonresidential equipment is a reasonable proxy for AI spending. The expected AI contribution is ~0.44 percentage points.
- Change in Private Inventories (CIPI) nets to zero over time. Thus, the real final sales numbers are better numbers to follow, not the top line reported GDP.
Evolution of Atlanta Fed GDPNow 2025 Q4
2025 Q4 Nowcast
- GDP: 3.6 percent (top line estimate)
- Real Final Sales: 2.9 percent (GDP Minus CIPI)
- Real Final Domestic Sales: 2.2 percent
- Real Final Private Domestic Sales: 2.4 percent
Import Notes
Imports do not impact GDP, ever, by definition. Imports are not “Domestic” product.
However, the BEA subtracts imports from the GDP as a calculation because it erroneously adds imports to domestic sales. This is a necessary adjustment because it would be impossible to figure out the domestic content of every item sold.
The GDPNow import contribution is positive because the model expects imports to decline relative to the third quarter.
Industrial Production
I would have thought today’s Industrial Production numbers would have added to GDP but they didn’t.
Q: Why?
A: It’s not the data that matters but what the model expected.
The GDPNow model expected numbers even bigger than happened.
Blue Chip and Other Forecast
GDPNow charts the Blue Chip forecast with a lag, but it does not post the actual numbers.
I asked Pat Higgins if he could post the Blue Chip numbers but he can’t. The Atlanta Fed can and does post the resultant chart with a lag.
The GDPNow model has had a very good track record when adjusted for gold. However, GDPNow does not adjust for silver. The latter may impact import-export numbers.
The Bloomberg Econoday consensus is 2.8 percent in a range of 1.7 percent to 3.6 percent.
2.8 percent seems like a reasonable estimate. If so, that would put final private domestic sales at 2.0 percent +- 0.4 percent or so.
Looking ahead, watch PCE services, especially health care. I expect a big splurge in health care expenditures in 2026.
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Medical Care Costs Surge. What’s the Inflation Impact on PCE and CPI?
For discussion of health care services price impacts, please see Medical Care Costs Surge. What’s the Inflation Impact on PCE and CPI?
I expect a 10 percent jump in health care services. More for knock-on impacts.
Hey Mish, if I remember correctly, you thought it would be a good idea to prohibit EBT or food stamps from being used to buy candy and soda. There are current news stories about that happening in more States. If I’m if I’m remembering your position correctly,,you want to do a follow up post. That might be some good news in a sea of bad news.
PCE (consumer services) may enjoy a little boost as A.I. gradually takes over. Simply to try to correct and assuage the mountainous errors and failures along the way until it becomes impossible to keep up with anymore. Then a new era of accountability will be introduced I suppose…….
Do you hear those faint drums? I do….something wicked this way comes….
https://www.cnbc.com/2026/02/18/oil-prices-today-iran-trump-nuclear-talks.html
Iranians are going to die because we can’t put a pedo in jail.
They would have died under a Democrat regime too. Or have you forgotten what Hillary did under Obama.
“We came, we saw, he died.” Followed by an evil cackle.
An aircraft carrier is going to sink and 5,000 USN lives will be lost because Trump can’t pull his lips off Bibi’s rear end.
If we suck so bad even a joke like modern Iran can sink a carrier it’s over for our title as the international badass.
Aircraft carriers are sitting ducks against hypersonic missiles. On a related topic, did you see how quickly we declared “victory” against the Houthis and got the aircraft carrier the heck out of there?
Aren’t they already dying at the hands of the IRGC? I’m not arguing we should meddle but arguing that they are going to die is to ignore that they already are, in the Ayatollah’s attempt to hold his theocratic stranglehold over the people. –the stupid pedo comment aside–
There was no way AI was ever going to “drive” the way it was predicted to because its valuation got way out over its ski’s of reality and now is having that Pets.com momment where everyone realizes, oh, so this won’t cure cancer and bring world peace? No, no it won’t.
Where’s the killer app? Been a few years now, who has AI made rich other than cat fishers and AI companies?
I’m interested what Mish thinks of this comparison seeing as he probably remembers the dot com bubble much better than I do. It seems like a very apt comparison to me.