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 “This is a split-screen economy,” said Heather Long, chief economist at Navy Federal Credit Union. “AI is doing well and the middle class is squeezed.” Reports from the nation’s tech giants yesterday showed how much money is being thrown at artificial intelligence. On Thursday, that cash-fueled engine was on full display, as new data from the Trump administration indicated inflation-adjusted gross domestic product increased an annualized 2% in the first quarter. “AI can take the baton from a GDP standpoint,” said Michael Skordeles, head of US economics at Truist. “But the consumer is critical no matter what.” And while those consumers continue to spend, much of that is tied to spiking gas prices caused by the US-Israel war with Iran. Economists though see a risk of spending declining soon, as rising transport costs further inflame inflation. And the related disruption of fertilizer supply augurs higher grocery bills over time.  That in turn, warns Wells Fargo economist Shannon Grein, will lead to less discretionary spending. Simultaneously, job opportunities have dried up across much of the economy as more companies in the tech and financial sectors engage in mass terminations, a phenomenon increasingly driven by AI. “It seems to be more of a business-driven recovery, which maybe is why the average person may not feel the economy is growing the same way as a more traditional consumer-led recovery,” said Skordeles. What You Need to Know TodayWhile Wall Street hit a record on Thursday as investors celebrated America’s tech-driven growth, the Iran war’s effect on energy prices is coming home to roost. Iran’s new supreme leader gave a rare statement on Thursday, vowing not to give up the country’s nuclear or missile technologies and signaling Tehran would keep control of the Strait of Hormuz. The Islamic Republic will “guard” its “advanced technologies” like it does its own borders, Mojtaba Khamenei said in written remarks. It will “secure the Persian Gulf region and dismantle the hostile enemy’s exploitation of this waterway,” he added, referring to the vital strait. The stance, taken together with Donald Trump’s refusal to end the US naval blockade, may lead to further fighting.  Mojtaba Khamenei participates in the annual Quds Day rally in Tehran in 2019. Photographer: Rouzbeh Fouladi/AFP/Getty Images “Trump wants to end the Iran war, but not on the terms proposed by Tehran,” said Becca Wasser and Chris Kennedy, analysts at Bloomberg Economics. “That suggests the question is no longer whether he escalates to push for a better offer, but when and how. We think the most likely window for action is within the next two weeks, and that renewed US strikes are the most likely course.” The US Air Force agreed to buy an undisclosed number of interceptor drones from a company backed by Trump’s sons, according to the firm, deepening the military’s ties to defense contractors linked to the first family as the US-Israel war with Iran enters its third month. The move has exacerbated criticism of unprecedented conflicts of interest as the president and his family reap billions of dollars in deals and endeavors that Democrats and other critics have condemned as corrupt. Three of the biggest names in private credit moved to reassure investors this week about the AI risks facing their software borrowers, using “score cards” and outside consultants.  Software lending makes up about 20% of the loans deployed by business development companies, Barclays analysts estimated, but the actual exposure may be much larger, as many private credit funds label their software loans as something different. That has made it challenging for investors to figure out what’s at risk. Spring Sale: Save 60% on your first year Get the numbers behind the narratives. Enjoy unlimited access to Bloomberg.com and the Bloomberg app, plus market tools, expert analysis, live updates and more. Offer ends soon. Unlock 60% offWhat You’ll Need to Know TomorrowFor Your CommuteMore from BloombergEnjoying Evening Briefing Americas? Get more news and analysis with our regional editions for Asia and Europe. Check out these newsletters, too:
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