Graph of the Week – ‘IT Factor’ Stands Out in US GDP Data

US Economy

One  indicator of demand in the US economy stood out in the latest GDP data: business investment. It added 1.3% to GDP – marking the largest amount in three years and one that was well above the long-run average of just 0.5%.

 

The main driver was information processing equipment – to be precise capital spending on the rollout of artificial intelligence technologies.

 

The number added some cheer to mixed data. Higher net exports led to a negative contribution to GDP growth, partly offset by a rise in inventories. Consumer spending held up as outlays were brought forward ahead of the administration’s raft of import tariffs and their effect on retail prices. Its resilience also came in the face of market expectations of a depletion of excess savings from pandemic stimulus packages.

 

Research and consulting company Forrester has forecast that software spending in the US will increase by 10.7% in 2025 as companies look to leverage cybersecurity and cloud and generative AI technologies to drive growth and innovation. It added that cloud revenues were on track to grow faster in 2025 than 2024.

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