OpenAI is staying private (for now)

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Kai Ryssdal (1:02)

The economic news of the day is kind of an alphabet soup. IPO and PCE, GDP and JOBS.

From American Public Media, this is Marketplace.

In Los Angeles, I'm Kai Rizdall. It is Wednesday today. This one is the 30th of September. Good as it always is to have you along, everybody. All right, so here's where we are as September and the third quarter come to a close. First of all, inflation, still a thing, we learned from the personal consumption expenditures, the price index out this morning, 3% at a core level, that is, of course, repeat after me, minus food and energy. Yes, it is higher than the Federal Reserve wants it to be, but quite a bit lower than everybody had been guessing it would be. So you put that in the good category. Moving on, we got the final reading on economic growth in the second quarter this morning. GDP grew at an annualized rate of 2.2% April through June, a nice bump from the last estimate. Also, in the good category. And while consumers do continue to carry this economy, businesses are doing their part too, specifically business investment. As Marketplace's Stephanie Hughes reports now to get us going, second quarter GDP was in part brought to you by the letters A and I.

Stephanie Hughes (2:35)

You know what could be the motto of American companies right now?

Put some AI on it. Shannon Grinds, an economist at Wells Fargo.

Shannon Grinds (2:42)

They're doing what they can to spend on AI today because they don't want to be left behind when it does become revolutionary to their day-to-day work.

Stephanie Hughes (2:50)

Basically, if AI turns out to be an era-defining technology, like say, the wheel was, companies don't want to be left without any wheels dragging way behind their competitors. So they're investing in software and communications equipment.

Shannon Grinds (3:04)

A continued prioritization of things that are high-tech or AI related.

Stephanie Hughes (3:07)

That investment is a driver of GDP growth. Also a contributor?

Ethan Strube (3:12)

A lot of this is about data center build out.

Stephanie Hughes (3:14)

Ethan Strube is an economics professor at St. Olaf's College.

Ethan Strube (3:17)

They're building data centers and they're building, they're adding transmission from the utilities or they're building their gas generators on site in order to power the stuff.

Stephanie Hughes (3:26)

While the building of these structures adds to GDP, some of the chips that go into powering AI are imported, which is subtracted from domestic economic growth.

Ethan Strube (3:35)

The fact that imports are growing, yeah, it's kind of consistent with that. Like, maybe a lot of this equipment is being imported from abroad.

Stephanie Hughes (3:41)

Even with that taken into account, Wells Fargo estimates that AI spending accounts for a quarter of GDP growth over the past year.

All of this investment is meant to make us more productive. But Strube says it's not entirely clear how that's going to pan out.

Ethan Strube (3:56)

The IT boom in the 1990s didn't contribute as much to productivity as you might have expected given how it seemed like it transformed all of our lives.

Stephanie Hughes (4:03)

We don't know yet if AI is the next fax machine, which was everywhere in the 90s but ultimately superseded by something else, or if it's the next wheel. I'm Stephanie Hughes from Marketplace.

Kai Ryssdal (4:16)

Little of this, little of that on Wall Street today. Stock traders really couldn't decide how they felt about the inflation and growth data that we got. Bond traders, on the other hand, knew exactly how they felt, and they was not happy. We will have the details when we do the numbers.