Authored by Mike Shedlock via mishtalk,
Nearly the entire fourth quarter GDP was AI related, What happened?
The BEA’s GDP Report for 2025 Q4 dramatically missed estimates of 3.0 percent by GDPNow and 2.8 percent by Bloomberg Econoday.
AI-Related Spending Change in Billions
- IP Equipment: 50.4
- Software: 15.0
- IP R&D: 15.6
Real Private Fixed Investment
Real Private Fixed Investment Spending Change in Billions
- Private Fixed Investment: 27.9
- Private Nonresidential Fixed Investment: 33.8
- Private Residential Fixed Investment: -2.9
- IP Equipment, IP Software, R&D: 81
Percentage Point Contributions to GDP
Nonresidential Contribution to GDP
- 2025 Q1: 1.24 Percentage Points
- 2025 Q2: 0.98 Percentage Points
- 2025 Q3: 0.44 Percentage Points
- 2025 Q3: 0.51 Percentage Points
Nonresidential AI Contribution to GDP
- 2025 Q1: 1.24 * 99.6 / 81.0 = 1.52 Percentage Points
- 2025 Q2: 0.98 * 79.7 / 63.9 = 1.22 Percentage Points
- 2025 Q3: 0.44 * 34.6 / 28.5 = 0.53 Percentage Points
- 2025 Q4: 0.51 * 81.0 / 33.8 = 1.22 Percentage Points
The 2025 AI total contribution is 1.52 + 1.22 + 0.53 + 1.22 = 4.49 percentage points.
For the fourth quarter, AI contributed 1.22 percentage points of 1.40 percent, nearly the entire amount.
I anticipated AI would provide much less based on the GDPNow second-to-last estimate of nonresidential equipment and IP.
However, the GDPNow aggregate includes some items that subtracted from GDP.
Information Processing Equipment added 50.4 billion alone to Nonresidential Fixed Investment. Yet the total for Nonresidential Fixed Investment was only 27.9 billion.
Q: What happened?
A: The Transportation Equipment change was -27.6 billion.
Thus GDPNow aggregates cannot be used to estimate AI. Apologies offered.