Good and services across different economies have become more expensive because of the rush by companies to lead the AI revolution.
The unprecedented rush is increasing demand for everything from computer chips to software to electricity, pushing prices higher.
According to economists, if the boom continues, inflation could continue to rise, frustrating central bankers’ efforts to rein it in.
The U.S. Bureau of Labor Statistics reported Wednesday reported that in July, inflation rose by 3.4% from a year ago.
The core index, which excludes volatile food and energy prices, rose 2.5%. That’s 0.5 percentage points above the Federal Reserve’s longtime 2% target.
It’s also the exact amount Goldman Sachs estimated in July that the AI price explosion would add to core inflation by the end of the year.
If other inflation drivers, such as tariffs and the Iran war, don’t drive prices higher from here, many economists think the inflation picture could brighten.
“Inflation remains uncomfortably high, but it’s moving in the right direction,” says Mark Zandi, chief economist of Moody’s Analytics.
But AI’s impact on inflation is trickier to trace.
AI is increasing demand by gobbling up energy and key computer components.
The associated Wall Street boom has bolstered stock portfolios, spurring spending by the well-to-do, which is also increasing demand.
It might also increase supply one day by making workers more productive and, thus, lowering the costs of goods and services.
So far, though, there is plenty of evidence of AI’s continuing inflationary effects and little evidence of the deflationary ones.
The chip squeeze is hitting home with Americans: After years of decline, the cost of laptops and other consumer electronics is also rising (see chart).
In recent months, Apple, Samsung, Dell, and others have announced price increases on everything from iPads to laptops. Microsoft is raising prices on its Xbox gaming consoles.
Another higher cost: software. As companies incorporate AI into their software, prices are rising, according to Goldman Sachs’ July report.
At the same time, there are hints that AI is helping make some workers more productive.
In a March U.S. Census survey, just over half of workers said they had used AI for at least one of 11 everyday tasks.
Of those, nearly 1 in 3 said AI saved them an hour or two on the job.
But if previous technological revolutions are any guide, it will take years – or perhaps decades – for the impact of new tools to show up in other kinds of national economic data, such as worker productivity and efficiency.
Adding a new tool to old habits only helps a little. Real progress happens only when companies change how they do their daily work, analysts say.
AI is also making life tougher for central bankers. It’s unclear how long the AI boom and the resulting inflation will continue.
No one knows when the production-enhancing, cost-lowering phase of AI will kick in. That makes it more complicated to fine-tune monetary policy.
