Edward Conard

Top Ten New York Times Bestselling Author

  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “Unintended Consequences is full of substance, it is one of the must-read books of the year, and once I finish it I will be giving it a second read through right away.” - Tyler Cowen, Professor, George Mason University
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Friday, March 13, 2026

AI Summary. Commodity strategists project Brent crude to average $98 over two months—40% above the prior year's average—before falling to $71 by late 2026, with a 60-day disruption of oil flows through the Strait of Hormuz pushing prices to $145. On these forecasts, headline inflation is projected at 2.9%, growth at 2.2%, and peak unemployment at 4.6%.

Manuel Abecasis and David Mericle Goldman Sachs
Date Posted:

GS forecasts that Brent will average $98 in March and April, 40% above its 2025 mean, before falling to $71 by the end of the year. They now expect 2026 headline inflation to run at 2.9%, and have lowered their GDP growth forecast to 2.2%.

How do higher oil price forecasts change inflation, growth, and unemployment?

Core argument: Goldman Sachs commodity strategists expect Brent crude to average $98 in March and April, up 40% from the 2025 average, before falling back to $71 by 2026Q4.

Our commodity strategists now expect Brent to average $98 in March and April—up 40% from the 2025 average—before falling back to $71 by 2026Q4. In an upside risk scenario where oil flows through the Strait of Hormuz are disrupted for a total of one month, they estimate that Brent would average $110 in March and April before gradually declining to $76 by 2026Q4. A more extreme upside scenario with a 60-day disruption to flows through the Strait of Hormuz could see prices average $145 in March and April before declining to $93 by 2026Q4. Based on our new oil forecasts, our rules of thumb, these historical lessons, and the details of the February CPI report, we have raised our year-over-year December 2026 headline PCE inflation forecast by 0.8pp to 2.9% and our core PCE forecast by 0.2pp to 2.4%. We have also lowered our 2026 Q4/Q4 GDP growth forecast by 0.3pp to 2.2% (or 2.6% on a full-year basis). Our forecast for the peak unemployment rate is now 4.6%, up from 4.44% in February.

Takeaways by Macro Roundup® AI

  1. Goldman Sachs commodity strategists expect Brent crude to average $98 in March and April, up 40% from the 2025 average, before falling back to $71 by 2026Q4.
  2. In a scenario with one month of disrupted Strait of Hormuz oil flows, the strategists estimate Brent would average $110 in March and April before declining to $76 by 2026Q4, while a 60-day disruption would lift the average to $145 before a decline to $93.
  3. The December 2026 year-over-year headline PCE inflation forecast was raised by 0.8pp to 2.9% and core PCE by 0.2pp to 2.4%, with 2026 Q4/Q4 GDP growth lowered 0.3pp to 2.2% and peak unemployment now 4.6%.

Related Articles:

  • Oil Market Report – March 2026 — Conflict in the Middle East has cut crude and oil product flows through the Strait of Hormuz from about 20 mb/d to a trickle, prompting Gulf countries to cut oil production by at least 10 mb/d. Global oil supply is projected to fall by 8 mb/d in a single month.
  • The Long-Feared Persian Gulf Oil Squeeze Is Upon Us — With crude unable to reach world markets through the Strait of Hormuz, Iraq has cut output by more than two-thirds and producers in Kuwait and Abu Dhabi have slowed production as storage tanks fill. JPMorgan Chase analysts estimate regional daily output could fall by around 9m barrels, close to a tenth of global demand.
  • Global Economics Comment: Global Economic Impacts of the War in Iran — The main economic risk to major economies from the war in Iran is that higher energy prices lift inflation and slow growth, with oil near $80/bbl, up 14% since late February. Analysts project oil moderating to $76/bbl and then $65/bbl as the risk premium fades in a structurally oversupplied market.

AI Summary. Investor concern that the Iran war will raise government spending and widen budget deficits has triggered a selloff in long-term government bonds, pushing the 30-year US Treasury yield near 4.90% and lifting yields from the UK and Germany to Australia and Japan. A global borrowing wave could further pressure the $31tn US Treasury market.

Greg Ritchie, Ruth Carson, and Ye Xie Bloomberg
Date Posted:

Since February 27th, 10 and 30-year Treasury yields have both risen ~30bps: the 10-Year is up 30bps and the 30-Year is up 27bps.

Are war-driven deficit fears pushing long-term government bond yields higher?

Core argument: The 30-year Treasury yield rose to close to 4.90%, its highest in a month, as investors worried the Iran war will lift spending and swell budget deficits across countries.

Investors are growing worried that the Iran war will drive up expenditures and swell budget deficits in countries around the world, sparking a selloff in long-term government bonds. The move has driven the 30-year Treasury yield to close to 4.90%, the highest in a month, as markets are already worrying over oil-driven inflation fret governments will need to borrow more to pay for defense spending and to shield households from higher energy costs. More broadly, global bonds have surrendered their year-to-date gains. Bond yields have spiked from the UK to Germany to Australia to Japan. A wave of government borrowing globally could put further pressure on the $31 trillion US Treasury market, should investors opt for higher yields elsewhere. Bloomberg’s gauge of Treasuries returns has almost wiped out its gains for this year.

Takeaways by Macro Roundup® AI

  1. The 30-year Treasury yield rose to close to 4.90%, its highest in a month, as investors worried the Iran war will lift spending and swell budget deficits across countries.
  2. Global bonds have surrendered their year-to-date gains, with yields spiking from the UK to Germany to Australia to Japan, and Bloomberg's gauge of Treasuries returns has almost wiped out its gains for the year.
  3. A wave of government borrowing globally to fund defense spending and shield households from higher energy costs could pressure the $31 trillion US Treasury market if investors opt for higher yields elsewhere.

Related Articles:

  • Are Government Bonds Safe in Times of War and Pandemic? — Government bonds severely underperform in wartime, in absolute terms and relative to equities, housing, and economic growth, unlike in financial crises when bonds tend to outperform stocks. The U.S. and U.K. reduced war-driven debt-to-GDP ratios without explicit default, using surprise inflation and financial repression that shifted fiscal burdens onto bondholders.
  • The First 36 Hours of War Consumed Over 3,000 U.S.-Israeli Munitions — The authors estimate replacing two destroyed U.S. radars would take five to eight years and $1.1bn for one and 12–24 months and $50m–$75m for the other, making supply-chain fragility and replacement timelines a greater constraint than materials cost. Both systems require gallium, of which China controls 98% of global supply.
  • The Race Between Asset Supply and Asset Demand — The authors estimate that demand for assets has outpaced supply by roughly 400% of GDP versus 100%, making rising asset demand the leading contributor to falling interest rates. They project that debt sustainability requires fiscal consolidation exceeding 10% of GDP, though debt could reach 250% of GDP without raising interest rates.

AI Summary. Total factor productivity — a measure of how efficiently labor and capital are combined — grew 1.27% over the most recent four quarters, while a utilization-adjusted version intended to better capture technical progress grew just 0.32%, down from 1.70% the prior year. The gap reflects a relatively high estimate of growth in how intensively capital and labor were used.

John Fernald Federal Reserve Bank of San Francisco
Date Posted:

Fernald’s updated productivity tracker, which tends to presage closely the BLS release due next Thursday, shows no uptick in (unadjusted) TFP growth. It has 2025 TFP growth at 1.27%, ~unchanged from the BLS’s 1.23% for 2024.

Is measured productivity growth outpacing underlying technical progress?

Core argument: Total Factor Productivity grew 1.27% over the four quarters ending in the fourth quarter of 2025, while utilization-adjusted TFP, intended as a purer measure of technical progress, grew only 0.32%.

Over the past four quarters ending in the fourth quarter of 2025, Total Factor Productivity grew at a rate of 1.27% and Utilization-adjusted TFP [which accounts for “the intensity margin for the workweek of capital and labor effort” and is intended to be a purer measure of technical progress] grew at a rate of only 0.32% in 2025, compared to 2024’s 1.70, reflecting a relatively high estimate of growth in factor utilization during 2025.

Takeaways by Macro Roundup® AI

  1. Total Factor Productivity grew 1.27% over the four quarters ending in the fourth quarter of 2025, while utilization-adjusted TFP, intended as a purer measure of technical progress, grew only 0.32%.
  2. Utilization-adjusted TFP growth of 0.32% in 2025 fell from 1.70% in 2024, reflecting a relatively high estimate of growth in factor utilization during 2025.
  3. Utilization-adjusted TFP accounts for the intensity margin for the workweek of capital and labor effort.

Related Articles:

  • Concentrated Growth: The Role Of The IT Sector — Since 1988, total factor productivity in the information technology sector has risen about 178%, versus about 12% across all non-IT sectors combined, while aggregate productivity rose about 40%. The IT sector accounts for roughly 45% of cumulative aggregate productivity growth, once sectoral linkages to downstream industries are weighted in.
  • Productivity During and Since the Pandemic — Total factor productivity growth since early 2021 has run only slightly above its 2010–19 average, suggesting the 2020 productivity surge reflected cyclical dynamics layered on a continuation of the slow pre-pandemic trend. Productivity has since grown somewhat faster than the authors' analysis predicted, but remains well below the 1995–2004 pace.
  • The Productivity Slowdown in Advanced Economies: Common Shocks or Common Trends? — Total factor productivity is the main factor accounting for differences in labor productivity growth across countries and over time, and its growth has been lackluster across large advanced economies since the mid-2000s. The authors find this slowdown appears in both manufacturing and market services, with U.S. productivity growth slowing before the Great Recession.

AI Summary. Gross domestic product can rise on investment alone even as other components weaken, because capital spending generates capital formation and corporate revenue rather than wages — data center construction employs thousands during building but a hundred or fewer after opening. Since mortgage debt service is fixed in nominal terms, even modest income declines can push borrowers toward default.

Paul Kedrosky Notes on Complexity
Date Posted:

Kedrosky argues that a persistent increase in investment could drive overall GDP growth while consumption lags. He suggests that the first signs of such an emerging “ghost economy” would likely show up in credit performance and housing markets.

Can GDP grow on investment alone while household incomes weaken?

Core argument: Data center construction employs workers in the thousands during the build phase, only to fall to a hundred or fewer once the facility opens, illustrating that capex generates capital formation and corporate revenue rather than wages.

GDP can rise with investment ("I" in GDP terms), despite everything else in GDP being weak, or even falling. It is just math. Capex does not necessarily generate broad income growth. It generates capital formation and corporate revenue, not wages. You can see that directly in data centers, where construction jobs are in the thousands, only to collapse to a hundred or fewer post-opening. The result is a strange possibility: the economy can grow rapidly, at least in accounting terms, while the demand side weakens badly. That is the essence of Ghost GDP. One place this dynamic would show up quickly is household credit. Mortgage obligations are nonlinear with respect to income changes. Debt service is fixed in nominal terms, so even modest income declines can push borrowers toward default. Once debt-service coverage ratios approach one, default probabilities rise sharply.

Takeaways by Macro Roundup® AI

  1. Data center construction employs workers in the thousands during the build phase, only to fall to a hundred or fewer once the facility opens, illustrating that capex generates capital formation and corporate revenue rather than wages.
  2. GDP can rise on the investment component alone even as other components weaken or fall, producing what the author calls "Ghost GDP," rapid accounting growth alongside a badly weakening demand side.
  3. Mortgage debt service is fixed in nominal terms and nonlinear with respect to income changes, so even modest income declines can push borrowers toward default, with default probabilities rising sharply as debt-service coverage ratios approach one.

Related Articles:

  • Tech Has Never Caused a Job Apocalypse. Don’t Bet on It Now — Labor Department data analyzed by researchers show the number of software developers up 5% year over year, a pace largely consistent with the past 23 years, while computer programmers declined slightly in line with a decades-long trend. The median young computer science graduate earned 63% more than the typical young graduate in 2024, up from 47% in 2009.
  • Trump’s Immigration Crackdown Fails to Deliver Jobs for US-Born Workers — Researchers at the American Enterprise Institute and the Brookings Institution estimate net migration into the US may have turned negative for the first time in at least 50 years. That decline coincided with rising joblessness among US-born workers, whose labor force participation has fallen in recent months to near its lowest level since 2021.
  • Zero-Sum Thinking and the Roots of U.S. Political Divides — Zero-sum thinking — viewing gains for one group as losses for another — is associated with greater support for liberal economic policies, stronger alignment with the Democratic Party, and weaker alignment with the Republican Party. The authors also find it linked to believing the QAnon conspiracy theory holds some truth and to sympathy for the attack on the U.S. Capitol.

AI Summary. Analysis of project-level manufacturing construction data shows planning for new facilities surged before the US semiconductor subsidy law was enacted, which some read as evidence the building boom was market-driven. A subsector and regional breakdown shows much of the increase was concentrated in the industries and geographies most relevant to the law's awards.

Skanda Amarnath Factory Settings
Date Posted:

The CHIPS Act’s impact on U. S. manufacturing construction looks far stronger when accounting for pre-passage information and observing the sharp trend break in computers & electronics—two-thirds of the boom—that appeared right as Senate funding passed.

Did semiconductor subsidies drive the manufacturing construction boom?

Core argument: A January 2025 FEDS Note using project-level Dodge Data & Analytics data finds that planning for new manufacturing facilities surged in 2021, before the CHIPS Act was enacted, and that the mid-2022 peak in construction starts came from projects planned pre-enactment.

Skepticism about CHIPS’s effects on construction spending may stem from a January 2025 FEDS Note. The analysis uses project-level data from Dodge Data & Analytics to trace manufacturing construction from planning to construction starts. The central finding is that planning activity for new manufacturing facilities surged in 2021 — well before CHIPS was enacted — and that the mid-2022 peak in construction starts was driven by projects that firms began planning before the legislation became law. Based on that evidence, a natural inference is that the boom was already underway on its own market-driven logic, and that CHIPS may not have been so relevant to the historic rise in construction spending. A more granular analysis of the planning data challenges that simplistic reading. The CHIPS Act had a long and public legislative history that made it possible to track the likelihood of passage well before its enactment; firms were likely planning their construction activity based on policy expectations even during the 2021 pre-passage surge the FEDS Note identifies. Breaking down the planning data by manufacturing subsector and census division makes apparent that a substantial share of the construction uptick was concentrated in the industries and geographies most relevant to CHIPS award funding, suggesting that the policy effects were more potent than a focus on the enactment date alone implies.

Takeaways by Macro Roundup® AI

  1. A January 2025 FEDS Note using project-level Dodge Data & Analytics data finds that planning for new manufacturing facilities surged in 2021, before the CHIPS Act was enacted, and that the mid-2022 peak in construction starts came from projects planned pre-enactment.
  2. Because the CHIPS Act had a long and public legislative history that allowed firms to track its likelihood of passage, firms were likely planning construction on policy expectations during the 2021 pre-passage surge the FEDS Note identifies.
  3. Breaking the planning data down by manufacturing subsector and census division shows a substantial share of the construction uptick concentrated in the industries and geographies most relevant to CHIPS award funding, suggesting policy effects larger than an enactment-date focus implies.

Related Articles:

  • TSMC Overseas Fabs – A Success? — TSMC's Arizona chip plant cannot compete on cost with its Taiwan operations because U.S. construction and operating costs are far higher, even though equipment costs — usually the largest share of cost per wafer — are similar across locations. The author argues the Arizona plant does little to reduce concentration of advanced logic production in Taiwan.
  • The Chips Act Has Been Surprisingly Successful So Far — The US government has spent over half of its $39bn in Chips Act semiconductor incentives, and chip companies and supply chain partners have announced $327bn of investments over the next 10 years, according to Semiconductor Industry Association calculations. US data show a 15-fold increase in construction of computing and electronics manufacturing facilities.
  • Industrial Policy through the CHIPS and Science Act — Semiconductor firms in Korea and Taiwan have launched large domestic capital spending programs backed by tax credits, with wafer capital spending projected at $716bn in Taiwan and $300bn in Korea over 2024-2032. Given lower Asian costs, these firms are likely to cut US spending before home spending if sales disappoint.

Monday, March 16, 2026

AI Summary. The authors argue that India's 2015 GDP methodology used inappropriate deflators and indicators, breaking the historical link between reported GDP and exports, credit, taxes, electricity use, and industrial production. They estimate the economy grew 4–4½% on average from 2011 to 2023 rather than the reported 6%.

Abhishek Anand, Josh Felman and Arvind Subramanian Peterson Institute for International Economics
Date Posted:
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Cumulating the growth rates from India’s National Account Statistics over the 2004-2025 period leads to the conclusion that the levels of real GDP and consumption are overstated by 22 and 31%, respectively, according to Arvind Subramanian.

Has India overstated its economic growth since 2011?

Core argument: The authors estimate India's economy grew 4–4½% on average from 2011 to 2023 rather than the 6% officially reported, with growth overestimated by about 1½–2 percentage points under the 2015 GDP methodology.

This paper examines the GDP methodology introduced in January 2015, initially to the post 2011–12 numbers and later to the historical series. After the 2015 methodology was introduced, correlations between GDP and key indicators that span sectors—exports, credit, taxes, electricity consumption, sales, and the index of industrial production— broke down or weakened. The main problem with the 2015 series was not the absence of double deflation, as is often alleged, but rather the use of inappropriate deflators and indicators. These methodological problems caused growth over the past two decades to be misestimated in both directions (table 1). Broadly, they caused growth for 2005–11 to be underestimated by about 1–1½ percentage points in the backcasting exercise; and caused subsequent growth to be overestimated by about 1½–2 percentage points. We estimate that from 2011 to 2023, the economy actually grew at 4–4½% on average instead of the 6% reported. Consequently, we find that instead of steady growth over the past two decades, there was a boom followed by slower but still robust growth the last two decades that is at variance with general perception and most indicators. The macro indicators surged from the 1990s to the early 2000s but then decelerated sharply, falling below pre‐2005 levels. Yet official GDP growth figures portray a picture of stable growth over the entire period.

Takeaways by Macro Roundup® AI

  1. The authors estimate India's economy grew 4–4½% on average from 2011 to 2023 rather than the 6% officially reported, with growth overestimated by about 1½–2 percentage points under the 2015 GDP methodology.
  2. The 2015 methodology's backcasting underestimated India's 2005–11 growth by about 1–1½ percentage points, implying a boom followed by slower but still robust growth rather than the steady two-decade expansion official figures portray.
  3. After the January 2015 methodology took effect, correlations between India's GDP and exports, credit, taxes, electricity consumption, sales, and the index of industrial production broke down or weakened, which the authors attribute to inappropriate deflators and indicators rather than the absence of double deflation.

Related Articles:

  • Building Long-Term Returns: Our 10-Year Forecasts — Analysts forecast an average annual total return of 6.5% for the S&P 500 stock index over the next 10 years, within a range of 3% to 10%, which would rank in the 27th percentile of 10-year returns since 1900. The base case combines 6% annual earnings-per-share growth, a 1% annual decline in valuations, and a 1.4% average dividend yield.
  • Data Update 4 for 2026: A Risk Journey Around The World! — Measured in dollar market capitalization terms, India was the worst-performing sub-region globally, rising only 3.31% as the Sensex gained 8.55% in local currency and the rupee depreciated against the dollar. US equities accounted for 47% of global market capitalization but only 38% of the year's change, with Europe and China contributing larger shares.

AI Summary. Crude oil from Iran, Iraq, Kuwait, Saudi Arabia, Qatar, and the UAE equaled about 20% of global supply and over 40% of crude exports, and much is now unavailable with Strait of Hormuz traffic near zero, yet Brent futures trade near $103/barrel. Past smaller disruptions required larger, slower price adjustments.

Matt Klein The Overshoot
Date Posted:

Klein suggests the modest rise in oil prices may be too small to equilibrate the oil market following the nearly unprecedented reduction in the flow supply of oil. Futures markets may turn out to be underestimating the persistence of the supply shock.

Are oil prices low relative to the size of the supply disruption?

Core argument: Crude oil exported from Iran, Iraq, Kuwait, Saudi Arabia, Qatar, and the UAE equaled about 20% of global supply and more than 40% of all crude exports before the war with Iran, and much of it is now unavailable.

The striking thing about oil prices, given what is going on in the world, is how low they are. Crude oil exported from Iran, Iraq, Kuwait, Saudi Arabia, Qatar, and the UAE was equivalent to about 20% of global supply before the recent war with Iran, or more than 40% of all crude oil exports. Much of this supply is now unavailable, with traffic through the Strait of Hormuz still stuck around zero as ships avoid Iranian drones, missiles, and mines. Yet as of this writing, front-month Brent crude futures are trading at just $103/barrel. Comparing the current crisis with previous notable oil disruptions, both in terms of price and volume impact, is helpful for getting some perspective. There are three big takeaways: The current threat to supply is unprecedented. Prior changes in prices required to reduce demand and/or increase supply were far larger than what we have seen so far, and the adjustment periods also took longer, even though the changes in volumes were also far smaller than what is currently happening. The U.S. is still extremely sensitive to disruptions of crude oil imports despite being a net exporter of petroleum products, at least when it comes to inflation.

Takeaways by Macro Roundup® AI

  1. Crude oil exported from Iran, Iraq, Kuwait, Saudi Arabia, Qatar, and the UAE equaled about 20% of global supply and more than 40% of all crude exports before the war with Iran, and much of it is now unavailable.
  2. Traffic through the Strait of Hormuz remains around zero as ships avoid Iranian drones, missiles, and mines, yet front-month Brent crude futures trade at just $103/barrel.
  3. Previous oil disruptions involved far larger price changes and longer adjustment periods despite much smaller volume losses, and the U.S. remains highly sensitive to crude import disruptions for inflation despite being a net exporter of petroleum products.

Related Articles:

  • Iran and the US Economy — Commodity strategists project Brent crude to average $98 over two months—40% above the prior year's average—before falling to $71 by late 2026, with a 60-day disruption of oil flows through the Strait of Hormuz pushing prices to $145. On these forecasts, headline inflation is projected at 2.9%, growth at 2.2%, and peak unemployment at 4.6%.
  • Oil Market Report – March 2026 — Conflict in the Middle East has cut crude and oil product flows through the Strait of Hormuz from about 20 mb/d to a trickle, prompting Gulf countries to cut oil production by at least 10 mb/d. Global oil supply is projected to fall by 8 mb/d in a single month.
  • Fighting Words: The Energy Transition in 2026 — Estimates based on primary energy overstate how much electricity is needed to replace oil in passenger cars, since electric motors convert 80%-90% of electricity into motion versus about 18% for gasoline cars. Measuring useful final energy net of waste heat avoids this "primary energy fallacy": the US consumed 45 exajoules of useful final energy versus 95 exajoules of primary energy.

AI Summary. The Bureau of Economic Analysis revised quarterly US GDP growth down to 0.7% annualized, with the category capturing servers and computer chips contributing 0.66 percentage points and the rest of the economy about 0.04 points. Including data center structures and power buildout, AI-related capital spending may account for roughly 0.80 points, exceeding total growth.

Paul Kedrosky Notes on Complexity
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After Friday’s downward revision of Q4 GDP to 0.7%, the AI buildout’s capex appears to account for essentially all of Q4 GDP growth. Exclusive of investment in servers, GPUs, and related equipment, the economy grew .04pp – “statistical noise.”

How much of US growth comes from AI capital spending?

Core argument: The BEA's second estimate cut Q4 2025 U.S. GDP growth to 0.7% annualized, half the advance estimate, with the line capturing servers and GPUs contributing +0.66 percentage points and the rest of the economy roughly +0.04 points.

[Last Friday] BEA second estimate revised Q4 2025 GDP growth down to 0.7% annualized, which is half the advance estimate. Buried in the detail: the BEA line that captures servers and GPUs and such contributed +0.66 percentage points to that growth. The rest of the U.S. economy contributed roughly +0.04 points — statistical noise. That's the direct figure. It almost certainly undercounts AI's role. Data center structures investment is a net positive contributor masked inside a broader nonresidential structures line that declined overall. Power infrastructure buildout driven by data center demand adds more. Construction wages more yet. A reasonable upper-bound estimate puts AI-related capex at around +0.80 percentage points — exceeding total Q4 GDP growth. The implication: Strip out the AI infrastructure buildout and the U.S. economy was flat in Q4, with government spending (-1.03pp) and weak exports doing the most damage. AI capex just ate the (weakening) U.S. economy.

Takeaways by Macro Roundup® AI

  1. The BEA's second estimate cut Q4 2025 U.S. GDP growth to 0.7% annualized, half the advance estimate, with the line capturing servers and GPUs contributing +0.66 percentage points and the rest of the economy roughly +0.04 points.
  2. Adding data center structures, power infrastructure buildout, and construction wages, an upper-bound estimate puts AI-related capex at about +0.80 percentage points in Q4 2025, exceeding total GDP growth for the quarter.
  3. Government spending subtracted 1.03 percentage points from Q4 2025 GDP growth, and alongside weak exports did the most damage to an economy that was flat once the AI infrastructure buildout is stripped out.

Related Articles:

  • Rough Notes, Feb 20, 2026: AI Capex in Q4 GDP, Anthropic Revenues, Agentic Domains, etc. — An early estimate puts the floor contribution of artificial intelligence capital spending to fourth-quarter US GDP growth at about 64%, and likely closer to 80% including externalities and multipliers, though the calculation is not adjusted for imports. The author also notes that token price deflation persists and that US-China token price differences are immense and growing.
  • The Macro Implications of the AI Capex Boom — Artificial intelligence capital spending is estimated to add roughly 1.4 percentage points to US growth in one year and about 1.5 points the next, comparable to business investment's contribution during the tech bubble. A material part of that estimate reflects profits at Nvidia and a few other chipmakers that are unlikely to be recycled back into the economy.
  • OECD Economic Outlook, Volume 2025 Issue 2: Resilient Growth but with Increasing Fragilities — U.S. real GDP grew at a 1.1% annualized rate over the first half of 2025, but excluding booming AI-related investment output contracted 0.1%, with non-AI investment weakening. The OECD identifies a correction in equity markets lifted by expectations of high AI returns as a key downside risk to its projections.

AI Summary. New US homeowners spent 26% of their income on housing in 2024 versus 20% for existing homeowners, a six-percentage-point gap that is the widest in nearly 40 years. Historically the two groups' costs moved together, with the gap holding at roughly two to four percentage points.

Jess Remington Agglomerations
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As of 2024, American homeowners who bought a house within the last year were spending 26% of their income on housing, relative to 20% for existing homeowners – the largest gap in almost 40 years.

How wide is the housing cost gap between new and existing homeowners?

Core argument: New homeowners spent 26% of their income on housing in 2024 versus 20% for existing homeowners, a six-percentage-point gap, the largest in nearly 40 years.

Historically, monthly housing costs for new and existing homeowners have tended to move in tandem. From 1990 through the aftermath of the Great Recession, both groups saw costs rise during booms and fall during downturns, with the gap between them remaining relatively stable at two to four percentage points. That pattern briefly reversed during the Great Recession, when new buyers were able to purchase homes at depressed prices and consequently spent slightly less of their income on housing than existing owners. By 2017, the typical two-point gap had returned. The current divergence began in earnest in 2022. By 2024, new homeowners were spending 26% of their income on housing, compared to 20% for existing homeowners — a six-percentage-point gap, the largest in nearly 40 years. Although new homeowners spent a slightly larger share of their income on housing at the peak of the housing bubble in 2007 (28%), the gap with existing homeowners was smaller (four percentage points).

Takeaways by Macro Roundup® AI

  1. New homeowners spent 26% of their income on housing in 2024 versus 20% for existing homeowners, a six-percentage-point gap, the largest in nearly 40 years.
  2. From 1990 through the aftermath of the Great Recession, housing cost burdens for new and existing homeowners moved together, with the gap holding at two to four percentage points; the current divergence began in earnest in 2022.
  3. At the 2007 housing bubble peak, new homeowners spent a slightly larger 28% of income on housing, but the gap with existing homeowners was four percentage points.

Related Articles:

  • The Cost of Money is Part of the Cost of Living: New Evidence on the Consumer Sentiment Anomaly — Variation in the University of Michigan consumer sentiment index that inflation and unemployment cannot explain is strongly correlated with growth in consumer borrowing costs, such as mortgage and car loan rates. The authors estimate that including interest payments and homeownership costs in the consumer price index would raise measured inflation from 3% to 9%.
  • NAR Says the Typical First-Time Homebuyer Age Was 40 This Year, Up from 33 in 2021—but Is This Accurate? — The National Association of Realtors' mail survey, with a 3.5% response rate, puts the typical first-time homebuyer at age 40, while New York Federal Reserve credit-report data for the same period show an average of 36.2 years and a median of 33. The survey underrepresents buyers under 35 by 17 percentage points.
  • Affordability, Part II — Home ownership functions as the modern marker of full participation in American society, and while most people's incomes have risen faster than the cost of a broad basket of consumer goods, housing has become substantially less affordable over the past generation. The author argues encouraging more housing construction is the most important element of a long-run affordability agenda.

AI Summary. New York City's unsheltered population rose 26% from 3,588 to 4,504, while spending on services for that population more than tripled from $102m to nearly $368m. That spending grew from just under 5% to nearly 9% of total Department of Homeless Services outlays.

Thomas DiNapoli New York State Comptroller
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In 2025 New York City spent $81,705 per “street” homeless person, up 262% from 2019 whose numbers increased 26% during that period. This does not include spending on “sheltered” homeless, who are ~97% of the homeless population.

Has tripling spending on unsheltered services reduced the unsheltered population?

Core argument: New York City spending on services for the unsheltered rose 262%, from $102 million in FY 2019 to nearly $368 million in FY 2025, while the unsheltered population grew 26%, from 3,588 to 4,504.

New York City’s unsheltered population increased from 3,588 in FY 2019 to 4,504 in FY 2025 — a 26% increase from pre-pandemic levels. In that time, spending on services for this population has more than tripled, growing from $102 million in FY 2019 to nearly $368 million in FY 2025 (a 262% increase). Its share of spending has also increased, from just under 5% to nearly 9% of total Department of Homeless Services (DHS) spending.

Takeaways by Macro Roundup® AI

  1. New York City spending on services for the unsheltered rose 262%, from $102 million in FY 2019 to nearly $368 million in FY 2025, while the unsheltered population grew 26%, from 3,588 to 4,504.
  2. Services for the unsheltered climbed from just under 5% to nearly 9% of total New York City Department of Homeless Services spending between FY 2019 and FY 2025.

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