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AI boom creates analytical challenge for central banks as surging spending meets import offsets

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As massive investments in artificial intelligence continue unabated, the contribution of these outlays to the US economy and their precise impact on productivity remain subjects of intense debate.

The AI boom is heavily reliant on huge imports of hardware that the United States does not manufacture domestically.

This dynamic creates an unusual disconnect between the sheer scale of investment activity and the way it is reflected in official statistical releases, particularly GDP.

In this context, not all capital expenditures are reflected equally in GDP metrics. The construction of AI infrastructure relies heavily on imported semiconductor chips, servers, and networking hardware.

Consequently, a significant portion of the investment surge is offset in government growth calculations.

Artificial intelligence does not possess its own distinct, comprehensive category within official statistical frameworks. This obliges economists to infer its contributions from baseline investment and trade classifications.

In a paper published this month, Federal Reserve economists Paul Soto, Mason Thieu, and Jeffrey Allen wrote:

“The lack of a dedicated category for AI-related investment in national accounts, combined with the high import content of the equipment driving infrastructure buildouts, presents a heightened challenge in precisely measuring how much recent GDP growth has been powered by AI-related capital spending.”

The US economy expanded at an annualized rate of 2.1% in the first quarter. Federal Reserve economists estimate that AI expenditures—comprising capital outlays in software, data centers, energy infrastructure, and computing hardware—contributed approximately 0.73 percentage points to GDP growth.

However, the estimated contribution of AI investments would have been substantially larger were it not for the counterbalancing drag generated by imported AI components.

Net imports of computers, peripheral equipment, and components alone subtracted 0.45 percentage points from headline growth.

US AI import shares expand papidly

According to research by Minneapolis Fed economist Michael Waugh, AI-related products accounted for 23% of total US imports in 2025, up from 15% in 2023.

Computer hardware constitutes roughly half of these incoming shipments.

The remainder consists of electrical equipment, networking hardware, and cooling systems essential to building and operating AI data centers.

The Trump administration largely exempted many of these AI-related inputs from broad-based tariffs.

The interplay between AI capital outlays and trade dynamics was particularly pronounced in late 2025. Corporate entities funneled enormous capital into AI hardware during the final three months of the year, but once imports were factored into the equation, the net boost to GDP was largely erased.

Federal Reserve economists noted that the net impact of AI investments “varied significantly across quarters, as sharp import spikes in certain periods produced a negative contribution from net exports of computers, peripherals, and parts that offset the bulk of gross capital expenditure.”

Net imports exert drag on headline growth

Federal Reserve economists estimate that AI infrastructure investments added just 0.14 percentage points to GDP, even though top-line expenditures in relevant categories contributed roughly 0.75 percentage points prior to accounting for trade flows.

Net imports of AI equipment reduced overall GDP growth by 0.61 percentage points over the period.

Economists project that the economy expanded at an annualized rate of 1.8% during the April-June quarter. The official report will be released today (July 30).

Goldman Sachs anticipates a rebound in consumer spending alongside continued strength in corporate capital outlays driven by AI equipment expenditures.

The AI expansion is simultaneously forcing economists to re-examine traditional methodologies for measuring the broader economy.

Because growth is increasingly anchored in imported hardware and intangible software assets, conventional indicators of broader economic activity are becoming harder to interpret.

The productivity question: Capital utilization over AI adoption

Artificial intelligence appears to be enhancing worker productivity across a range of industries, and the US economy as a whole has recorded a notable productivity gain over the past few years.

However, it is far from certain that the former is directly driving the latter. A controversial new analysis indicates that companies are extracting more hourly output per worker not through widespread AI adoption—at least for now—but through more efficient utilization of existing capital assets.

According to Ernie Tedeschi, chief economist at Stripe, AI advancements may be yielding meaningful micro-level gains in specific sectors, but they have not served as the primary catalyst behind one of the most significant macroeconomic trends of recent years.

After decades of sub-par gains, the recent acceleration in labor productivity has stood out as one of the most positive developments for the US economy over the past few years.

Tedeschi noted that output per hour worked increased by 2.5% over the past year, compared to an average annual growth rate of 1.6% over the preceding two decades.

While that difference might appear modest, if sustained over even a few years, it compounds into a powerful effect, driving per-worker income and output to substantially higher levels.

However, Tedeschi found that while labor productivity has risen, total factor productivity—which measures output per unit of combined labor and capital inputs—remained virtually unchanged.

Examining performance across sectors, he observed that industries with high AI adoption did exhibit higher productivity growth, but that trend actually predated the pandemic—well before advanced large language models (LLMs) entered widespread commercial deployment.

Instead, Tedeschi concluded that higher output has been driven by more intensive and efficient utilization of existing capital stock.

Tedeschi wrote:

“Consider factories already built running longer hours, fully amortized server racks and GPU clusters being driven harder, or existing hotel rooms achieving higher occupancy rates. Economists refer to this as ‘capital intensity’ or ‘utilization rate.’ Higher capital utilization represents real economic gains, but it is fundamentally distinct from micro-level technological efficiency.”

In statements to Axios, Tedeschi said the US is in a period of elevated productivity growth and that it is increasingly plausible AI plays a role, but added a note of caution:

“We must remain realistic about how AI fits into this process, because doing so helps us discern whether AI represents a temporary fluctuation along the growth trajectory or a more permanent, transformative shift.”

AI boom complicates central bank strategy

While central bankers operate under mandates to preserve price stability, foster full employment, and maintain financial stability, the AI boom introduces fresh complexity across all three domains.

A report by the Bank for International Settlements (BIS) indicates that AI is blurring the traditional signals central bankers rely on to formulate monetary policy.

According to the BIS, the technology is simultaneously influencing both the supply and demand sides of the economy, triggering structural and cyclical shifts at the same time.

In the United States and other primary hubs of AI innovation, the near-term investment surge has sparked sharp demand for semiconductors and data center infrastructure components.

Concurrently, the stock market rally has inflated paper wealth, further stoking consumer demand. However, concerns persist that a portion of this market valuation may be illusory, raising fears of an AI asset bubble that could eventually burst.

While AI presents a medium-term risk of large-scale labor displacement, empirical evidence that this process has begun remains inconclusive.

Conversely, a scenario in which AI advances unlock substantial productivity gains would represent a favorable supply shock, which would typically be expected to exert downward pressure on inflation.

BIS economists Iñaki Aldasoro, Leonardo Gambacorta, Enisse Kharroubi, and Matthias Rottner wrote:

“The vast uncertainty surrounding the ultimate impact of AI presents distinct challenges for monetary policy and financial stability. First, AI simultaneously impacts demand and supply from both cyclical and structural perspectives. Moreover, these effects vary widely across individual sectors, complicating any assessment of underlying economic trends. Elevated uncertainty heightens the risk of policy missteps.”

Central banks—including the Federal Reserve, which concludes its policy meeting today, as well as the Bank of England and the Bank of Japan, both scheduled to meet tomorrow—are forced to make real-time interest rate decisions based on limited clarity regarding the direction, magnitude, and timeframe of the AI boom’s macroeconomic impact.

America

Pentagon breach exposes personal records of three million people

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A cyberattack targeting the US Department of War’s personnel database has resulted in the leak of personal information belonging to approximately 3 million people.

Speaking to ABC News, a Pentagon official stated that the system accessed by unauthorised individuals contained the records of 2,760,000 living persons and 294,000 deceased individuals.

The Military Times portal, which first broke the news, had reported the number of affected individuals as approximately 4 million based on two sources. The Pentagon official subsequently conveyed different figures to ABC News.

The leak encompasses Social Security numbers and duty information belonging to military personnel and civilian employees. According to an official notification examined by Military Times, the compromised records may also include names, dates of birth, contact information, sex, race, and military occupational specialties.

The unauthorised access to the information system of the Defense Manpower Data Center (DMDC) lasted for approximately nine months, between October 2025 and 16 July 2026.

ABC News reported that the access in question was obtained by a small number of third-party users. The vulnerability was closed after it was identified.

The DMDC is considered one of the Pentagon’s primary personnel records centres. More than 60 million records belonging to active-duty personnel, reservists, civilian staff, contractors, retirees, veterans, and military family members are stored at the centre.

The Pentagon has not detected any evidence that the leaked data has been misused. Military Times reported that affected individuals were offered identity restoration and credit history monitoring services.

A similar data breach previously occurred on the Federal Bureau of Investigation’s (FBI) recruitment website, FBIJobs.gov. According to information obtained by ABC News from internal communications and sources, the FBI is considering the possibility that data belonging to its entire staff may have been stolen.

The New York Times (NYT) examined a portion of the stolen FBI records. Home addresses, telephone numbers, official email addresses, Social Security numbers, dates of birth, hiring dates, and emergency contact details for relatives were identified within these documents.

The database also contained unit designations, duty roles, and information regarding the supervisors of personnel. Some records revealed assignments within counterintelligence and counternarcotics units, as well as departments examining threats originating from Russia, China, and Iran.

Ciaran Martin, the former head of the UK National Cyber Security Centre, noted that this type of breach could directly affect the FBI’s operational capabilities.

The hacker group known as ShinyHunters had announced that it had seized medical data and security clearance records alongside files belonging to tens of thousands of active and former FBI employees.

Experts evaluating the matter for the NYT warned that this information could be used to track agents, threaten their families, or compile dossiers by foreign intelligence services.

The ShinyHunters group initially threatened to release the data unless the bureau withdrew an advisory it had published concerning the group’s attack methods.

The group later asserted that it had never intended to leak the information and characterised its action as an advertising campaign.

In a report published in May, Reuters noted that the personal data of US military personnel had been used in surveillance and attack preparations.

According to the agency, Washington’s adversaries gained the ability to pinpoint areas where troops were concentrated by exploiting commercially available location data. US lawmakers at the time criticised the Pentagon for failing to adequately protect the personal data of military personnel.

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America

Canada diversifies oil and gas exports away from US

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US President Donald Trump’s trade policy and the Washington administration’s push to increase Venezuelan oil imports are prompting Canada to diversify its energy exports.

According to a report by The Wall Street Journal, recent developments are accelerating Canada’s development of new oil and natural gas projects.

Steps taken by the Ottawa administration, which aspires to become an energy superpower, are seen as potentially strengthening the country’s position in global markets.

In Canada, the world’s fourth-largest oil producer and fifth-largest natural gas producer, the energy sector accounts for approximately one-fifth of total exports.

Almost all of the country’s natural gas exports and approximately 90% of its oil exports go to the US.

The newspaper writes that the trade war with Washington and the atmosphere of confrontation entered into with Iran have heightened Canada’s desire to turn to alternative markets outside the US.

Officials plan to increase shipments of oil and liquefied natural gas (LNG) to European and Asian markets.

Accelerating infrastructure investments in line with this target, Canada is also shortening approval processes. The government is prioritising the construction of an oil pipeline extending specifically to the west coast.

According to the newspaper’s estimate, if major pipeline projects are implemented, Canada’s daily oil transport capacity could rise to 6.8 million barrels by 2034.

Routes heading to the west coast will make up approximately 30% of this capacity.

The Canadian administration is simultaneously advancing LNG export projects. According to the report, these investments could allow approximately 55% of Canadian natural gas exports to be directed to markets outside the US by the early or mid-2030s.

While the government expands tax incentives for the oil and natural gas sector, the province of Alberta also plans to overhaul its royalty system.

However, the newspaper notes that implementing the new projects requires heavy investment, and the process depends on the final decisions taken by producers as well as the completion of regulatory approval processes.

The expansion of pipeline and LNG infrastructure could gradually reduce Canada’s dependence on the US market while raising its share in the global energy market.

The Canadian Prime Minister’s demand to reduce reliance on the US market had also come to the fore in July.

According to Carney’s statement, the province of Alberta submitted a plan for a pipeline spanning more than 1,000 kilometres to the west coast of British Columbia.

Targeted for completion by September 2027, the line will reach the Pacific coast by following an existing corridor through the mountainous terrain.

This shift in energy comes at a time of strained relations with the US. Donald Trump said that if Canada obtains associate member status in the European Union, he could halt trade with Europe in certain sectors and impose high tariffs.

As reported by the Associated Press, Trump characterised such a rapprochement as a “potentially hostile act”.

European Commission President Ursula von der Leyen had proposed opening the path for Canada to become the EU’s first associate member. The terms of this associate membership status, which is not defined in EU treaties, are not yet clear and require the approval of member states to enter into force.

Canada, which does not seek full membership, aims for maximum rapprochement with the EU.

Following Trump’s return to the White House, relations between Washington and Ottawa deteriorated. The Trump administration, which repeatedly called on Canada to become the “51st state” of the US, introduced additional tariffs.

In July, the US began imposing 50% tariffs on certain Canadian-origin goods.

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America

US economic growth outpaces G7 peers amid artificial intelligence boom

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The US economy is projected to grow much faster than all other major advanced economies this year, as its domestic policies trigger difficulties across much of the globe.

According to Axios, the global economy has proved surprisingly resilient in the face of successive shocks.

The US stands out within this broader picture. A boom in artificial intelligence investment is helping the country expand far more rapidly than peer economies.

Yet this exceptional performance carries a price: more persistent inflation and interest rates that may need to stay at elevated levels for longer to rein it in.

The Organisation for Economic Co-operation and Development (OECD) projects that the US economy will expand by 2.2% this year.

That rate is roughly double the pace forecast for the eurozone, Germany, and the United Kingdom. Growth is expected to be even weaker in Japan (0.8%) and Canada (0.9%).

This growth gap is expected to persist next year. In 2027, US growth is projected to reach 2.1%, while growth across most other major advanced economies in the rest of the world is forecast to hover around 1%.

The OECD has grown more optimistic regarding the US since June, raising its growth forecast by 0.2 percentage points for 2026 and by 0.3 percentage points for 2027.

This trend contrasts with downward revisions to next year’s growth projections for the global economy overall, the eurozone, Canada, the United Kingdom, and Japan.

OECD Chief Economist Stefano Scarpetta told reporters this morning:

“The biggest risk remains the course of the conflict in the Middle East and its impact on the energy market. But there are a number of other risks, some of which appear to have become somewhat more pronounced compared to the June forecasts.”

Scarpetta highlighted rising government bond yields, the risks accompanying the AI investment boom, and the likelihood of extreme weather pushing up food prices.

According to the OECD, the boom in artificial intelligence (AI) has provided the US economy with a powerful shock absorber absent in most other economies.

Rapid growth in AI investment and manufacturing “partially offset” the economic blow dealt by the conflict in the Middle East.

Data centre and technology spending directly bolstered US growth.

The inflation outlook, meanwhile, is proving more stubborn than it appeared several months ago.

The OECD expects headline inflation in the US to fall from 3.6% this year to 2.6% next year.

However, this forecast for 2027 is half a percentage point higher than the figure projected in June.

Core inflation in the US is projected to stand at 3.3% this year, among the highest rates across leading advanced economies, before easing to 2.5% next year.

This stubborn path explains why the OECD expects the Federal Reserve to deliver one more interest-rate increase this year and anticipates rates will remain in the 4% to 4.25% range through the end of 2027.

On the other hand, the AI boom accelerating US growth is beginning to bring its own macroeconomic headwinds.

According to the OECD, long-term borrowing costs in most of these major economies are at their highest levels in at least 15 years.

The organisation argues that heavy borrowing by AI firms has contributed to pushing yields higher, which could elevate costs across the broader economy and leave markets vulnerable if AI profits fail to meet expectations.

America has contributed to making the global economic climate more challenging.

Even though its own economy has so far performed better than nearly all other countries, this resilience comes accompanied by an inflation problem that remains difficult to eliminate.

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