CPI for all items unchanged in May; shelter up

The Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in May on a seasonally adjusted basis, after rising 0.3 percent in April, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 3.3 percent before seasonal adjustment.

More than offsetting a decline in gasoline, the index for shelter rose in May, up 0.4 percent for the fourth consecutive month. The index for food increased 0.1 percent in May. The food away from home index rose 0.4 percent over the month, while the food at home index was unchanged. The energy index fell 2.0 percent over the month, led by a 3.6-percent decrease in the gasoline index.

The index for all items less food and energy rose 0.2 percent in May, after rising 0.3 percent the preceding month. Indexes which increased in May include shelter, medical care, used cars and trucks, and education. The indexes for airline fares, new vehicles, communication, recreation, and apparel were among those that decreased over the month.

The all items index rose 3.3 percent for the 12 months ending May, a smaller increase than the 3.4-percent increase for the 12 months ending April. The all items less food and energy index rose 3.4 percent over the last 12 months. The energy index increased 3.7 percent for the 12 months ending May. The food index increased 2.1 percent over the last year.

The Business Roundtable’s quarterly survey of major company CEOs shows steady confidence in the economy.

• The BRT’s economic outlook index, at 84, was a tick below the 85 reported in March and near the long-term average of 83.
• “The overarching message from our member CEOs is that the economy is steady and stable, but they remain cautious,” Cisco CEO Chuck Robbins, who chairs the Business Roundtable, said in a statement.

CEOs reported growing sales — with BRT’s index of sales activity rising to 123 from 118. They reported lower plans for capital spending, however, with that index falling to 70 from 78.

• Plans for hiring were unchanged compared to March, with that sub-index steady at 60.

• CEOs expect GDP to grow 2.3% over the coming year, up from 2.1% in March.
• “The survey results imply stable CEO plans and expectations, broadly in line with the historical average — certainly not signaling either overheating or recession.” Business Roundtable chief executive Josh Bolten tells Axios.

In a special question, 86% of CEOs said they agree or strongly agree that securing new trade agreements is critical to maintaining U.S. competitiveness. Both leading candidates for president have shown a fondness for new tariffs.

Small Business Optimism Up Slightly in May Economic Uncertainty and Persistent Inflation Continue to Weigh on Outlooks

The NFIB Small Business Optimism Index posted another modest gain in May; yet at 90.5, the index remains far below its 50-year average of 98. The primary stand out was a jump in the uncertainty index to its highest point since November 2020. As markets bet on when the Fed will ultimately cut rates, high financing costs are steadily chipping away at business sentiment. Sales, earnings and capital outlays also remained muted. Inflation is still the top challenge facing small businesses as the last mile back to 2% proves to be more difficult than previously anticipated. That said, compensation pressures do not appear to be a significant threat to reigniting inflation at the moment.

• Plans to raise prices ticked up in May as price pressures, especially for high-demand services, prove to be more stubborn than previously anticipated.
• Hiring plans notched a three-point jump in May coinciding with an upside surprise to nonfarm payrolls. That said, this series is volatile month-to-month, and the broader trend still points to waning labor demand.
• Wage pressures remain relatively muted even as May suggested an upshift in hiring plans. Firms reporting increased compensation costs fell back over the month, and plans to raise compensation reached its lowest reading since May 2021.

  

  

China’s Weaker-Than-Expected Inflation Fuels Demand Concerns

The consumer price index rose 0.3% from a year earlier, the National Bureau of Statistics said Wednesday, hovering above zero for the fourth straight month and comparing to a median forecast of 0.4% in a Bloomberg survey of economists. Factory-gate prices extended a deflation streak that started in late 2022.

Core inflation, which strips out volatile food and energy prices, rose 0.6% [vs +0.7% in April]. The producer price index slid 1.4% in May from a year earlier after a 2.5% decline in April, largely due to rises in commodity prices. (…)

MoM PPI rose 2.2% annualized after –3.9% in April per GS calculations.

AI CORNER

US Weighs More Limits on China’s Access to Chips Needed for AI

The measures being discussed would limit China’s ability to use a cutting-edge chip architecture known as gate all-around, or GAA, according to the people, who spoke on condition of anonymity because the deliberations are private. GAA promises to make semiconductors more powerful and is currently being introduced by chipmakers.

It’s unclear when officials will make a final decision, the people said, emphasizing that they’re still determining the scope of a potential rule. The US goal is to make it harder for China to assemble the sophisticated computing systems needed to build and operate AI models, they said — and to cordon off still-nascent technology before it’s commercialized.

Companies such as Nvidia Corp., Intel Corp. and Advanced Micro Devices Inc. — along with manufacturing partners Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co. — are looking to start mass-producing semiconductors with the GAA design within the next year. (…)

One person familiar with the matter said the measures wouldn’t go as far as an outright ban on GAA chip exports, but instead focus on the technology needed to make them.

There are also early-stage conversations about limiting exports of high-bandwidth memory chips, some of the people said. These semiconductors, made by SK Hynix Inc., Micron Technology Inc. and others, speed up access to memory, helping bolster AI accelerators. They’re used to train AI software — a process that involves bombarding models with information. It’s unclear whether a rule on high-bandwidth memory chips could come together, the people said, emphasizing that the GAA conversation is further along.

Some US allies are pursuing their own GAA technology export control measures as part of a handshake agreement that came together during recent trade talks, according to some of the people. There are already US restrictions on design software for GAA technology, imposed in 2022 after an agreement the prior year.

 Can China’s AI Technology Compete With the US?

Yes! Maybe even in smarter ways: https://www.youtube.com/watch?v=UitJxc9LE60

EU to Impose Additional Tariffs on EV Imports From China

The European Union will slap additional tariffs of as much as 38.1% on electric vehicles shipped from China as of next month, escalating a global trade war and upping the cost of selling cars in Europe for companies ranging from China’s BYD Co. to Tesla Inc.

The bloc formally notified carmakers including BYD Co., Geely Automotive Holdings Ltd., SAIC Motor Corp Ltd. of the levies due to be implemented around July 4, the European Commission said, following an investigation of subsidies that started last year. China’s EV manufacturers have been pushing more aggressively into Europe amid a domestic price war and years of building a lead in the technology.

The individual duties on BYD would be 17.4%, Geely 20% and SAIC 38.1%, the commission said on Wednesday. (…)

While the probe targeted Chinese automakers, the higher rates — up from a current 10% — will hit a range of Western carmakers too, led by Tesla, which ships the Model 3 from Shanghai to Europe, as well as BMW AG and Renault SA. The current charge on passenger car imports from Europe to China is 15%. (…)

FT

Major Oil Surplus Seen This Decade as Demand Hits Peak, IEA Says Global consumption to ‘level off’ by 2029 as supply grows

World consumption will “level off” at 105.6 million barrels a day in 2029, about 4% higher than last year’s level, amid surging sales of electric vehicles and improved fuel efficiency, the Paris-based policy adviser said in its annual medium-term outlook.

Meanwhile, oil production capacity continues to surge. Led by the US, it will be a “staggering” 8 million barrels a day higher than demand by the end of the decade, leaving the biggest buffer of spare output since the depths of the Covid-19 lockdowns. (…)

World oil consumption will continue to expand for several years, adding about 4 million barrels a day by the end of the decade amid economic expansion in India and China, and growing use by the aviation and petrochemical industries, the IEA said.

But use of the commodity will continue its “decades-long decline” in developed economies, sinking from last year’s 46 million barrels a day to 43 million a day by 2030 — the lowest level since 1991. Even Chinese demand will plateau by the end of the decade at about 18 million barrels a day, according to the report. (…)

A decade ago, the agency repeatedly warned of a looming oil supply “crunch” that never materialized as America’s shale boom shattered expectations. In 2022 it forecast an immediate collapse in Russian output that also didn’t occur, and in recent months has revised demand projections for 2024 both down and up.

In a separate monthly report also released on Wednesday, the agency lowered consumption projections for this year by 100,000 barrels a day to 960,000 barrels a day. “Flagging oil demand growth and inventory builds” point to a “comfortably-supplied market,” it said.

One risk to the IEA’s forecast is if the transition to clean energy is slower than expected. In a separate report on Wednesday, BloombergNEF slashed its sales estimates for electric vehicles and warned that the auto industry is falling off the track toward decarbonization. (…)

Growth in new oil supplies outside the Organization of Petroleum Exporting Countries and its partners will overtake demand as soon as next year, according to the report.

Producers across the Americas led by the US will add about 4.8 million barrels a day of capacity this decade, eclipsing the growth in consumption. The US will account for 2.1 million barrels of the expansion, with the remainder provided by Argentina, Brazil, Canada and Guyana. Even more could come onstream if tentative projects are approved. About 45% of the global capacity expansion will come from natural gas liquids and condensates. (…)

The full IEA report is here.

Recent economic data are puzzling economists. Corporate conference calls can provide real life indications how things really are. From The Transcript:

• “…on the consumer side, it’s just continued more of the same. Consumer is generally strong, high spend levels continue. We can talk about credit some more, but the short answer is not a whole lot of difference in terms of the trends that we’re seeing.” – Wells Fargo ($WFC ) CEO Charlie Scharf
• “When you look at the spend patterns by different income segments, as you called it, the trends have been relatively unchanged for several quarters” – Visa ($V ) CFO Chris Suh
• “…the consumer is spending, the consumer is spending.” – Fiserv ($FI ) President Frank Bisignano
• “…then on the consumer side, the consumer has just been resilient than any of us would have ever thought. I mean I think you can look at any quarter and say, gosh, this is the quarter, maybe it was going to be the season — the holiday season, whatever it may be that are going to start slow spending.” – Truist Financial ($TFC ) CEO William Rogers
• “So net-net, I’d say the state of the consumer is still pretty strong because that consumer has a job and they’ve had some real wage growth, and inflation is tempering. But it’s certainly more stressed than it was 2 years ago and consumers are a bit more levered than they were 2 years ago. And banks are less reluctant to make new loans, and consumers are less able to afford those loans because of higher rates. So net-net, consumer is okay, but they’re sweating harder than they were certainly 2 years ago. And it’s brought some reluctance to create new lending, and you see that with just a consistent decline in loan origination across most categories.” – TransUnion ($TRU ) CEO Christopher Cartwright
• “I would say — so first of all, credit quality continues to remain very, very good. It is — we know we’ve come from incredibly benign credit environment. The increases that we’re seeing in terms of delinquencies continue to look like they are very much on top of the performance that we had seen pre-COVID, so a more return to normal…we feel very good about what we’re seeing in terms of the credit card growth that we’ve had in the underlying credit quality.” – Wells Fargo ($WFC ) CEO Charlie Scharf

But some specific segments have different vibes:

• “…there’s still a pretty cautious consumer out there on durable goods…the end consumer is still just very cautious with their dollar” – Winnebago Industries ($WGO ) CFO Bryan Hughes
• “The quarter solidified that consumers are feeling the impact of multiple years of inflation across many key categories such as food, fuel, and rent and are, therefore, far more deliberate with their discretionary dollar…I would also call out that the slowdown we experienced was across all geographies, further suggesting there was a broader macro impact.” – Five Below ($FIVE ) CEO Joel Anderson

Also from the real world:

Bank of America aggregated credit and debit card spending per household rose 0.7% year-over-year in May, following the 1.0% YoY rise in April. (…) overall consumer spending momentum has largely remained stable this year. In May, retail spending growth, though still negative, reversed course to trend upwards, and while services spending growth eased back in May, it remained positive. On a monthly seasonally-adjusted (SA) basis, total card spending per household fell 0.9% month-over-month (MoM) in May, following the 1.3% MoM increase in April.

BofA data also reveal that discretionary spending is impacted by inflation:

(…) Are trade-downs and pressure on discretionary spending, despite strong wage gains, a potential sign of deteriorating financial health amongst the younger generations? And are some younger generations increasingly using credit to support their spending?

When looking at credit card data, it’s important to distinguish between ‘revolvers’ and ‘transactors.’ While the latter group uses their cards to make purchases and pays off the full balance each month, revolvers tend to maintain some level of positive card balance from one month to the next.

Intuitively, revolvers would most likely exhibit signs of being financially stretched, given they are already not paying their balance in full. Focusing only on this group, Exhibit 8 uses Bank of America internal data to show how the credit card utilization rate has changed since 2019 across generations for a stable cohort of clients classified as ‘revolvers’ and finds that all generations’ utilization rates are below the level they were in 2019. While Millennials and Gen Z have seen the most significant moves higher in utilization, these levels do not look particularly elevated.

Interestingly, while the older generations’ repayment rates are above 2019 levels, it appears that Gen Z and younger Millennials have seen a decline in their repayment rates to below 2019 levels. This could be a sign that these generations are under greater financial pressure and paying off less of their balances as a result. However, it is hard to abstract from ‘life-cycle’ influences as these cohorts had the highest repayment rates in 2019 and their current trajectory may simply be a reflection of their behavior becoming increasingly similar to older generations as they mature and take on more recurring months costs.

When we look at Bank of America internal data on saving and checking balances by all households, we see that all generations, from Gen Z through to Baby Boomers, have 44% or more deposits than they did pre-pandemic. (…)

Overall, based on our data, it appears that the strength of the labor market and the associated wage growth, as well as elevated savings deposits, have allowed a majority of younger cohorts to weather any pressures they are seeing from higher necessity outlays. However, around the edges, some do seem to be feeling more pressure, with some signs of rising credit card utilization rates and a rising proportion of the younger cohorts finding outflows from their accounts outstripping their inflows by a sizeable margin.

Feel-good consumers (Axios)

Consumers may feel glum about the economy, but when it comes to their own finances, they feel pretty good, according to the New York Fed’s latest Survey of Consumer Expectations.

About 78% of respondents expect to be financially stable or better off in the coming year — the largest share in nearly three years. Consumers’ optimism for stock prices in the year ahead was similarly the highest since 2021.

On average, the perceived odds of missing a minimum debt payment over the next three months fell by 0.9 percentage point to 12% — similar to that seen before the pandemic.

Meanwhile, median expected growth in household income rose a tick to 3.1% (though spending growth expectations moved down by 0.2 percentage point).

Views about the labor market were more mixed: The average probability that the unemployment rate will be higher next year jumped to almost 39%, more than a percentage point above the prior month. But consumers’ perceived chance of losing their own job, on average, fell nearly 3 percentage points to 12.4%.

Consumers had higher confidence inflation will ease in the year ahead, though they were more pessimistic about longer-term price trends.

• Median inflation expectations at the one-year horizon ticked down to 3.2%.
• That means the upward trend in inflation expectations observed in a slate of recent data did not continue — at least by this measure.
• Inflation expectations over the next three years held steady at 2.8%, but increased by 0.2 percentage point to 3% at the five-year horizon.

More on the labor market:

“And the second thing I’m paying a lot of attention to right now is I watch this stat, which is the frequency with which the member base changes jobs on LinkedIn. And if you go back 2.5 years, we all remember, I think it was in the Great Reshuffle, Great Resignation, just a ton of movement, people changing jobs. That really leveled off the past 2 years. But if you look at the past maybe 4 months, it’s really starting to pick up again. So I’m not saying we’re going into another Great Resignation or anything like that. But for the first time in 2 years, we are starting to see people moving jobs more frequently again. I think people were sheltering in place for a while, so we’re starting to pay a lot of attention to that.” – Microsoft ($MSFT ) LinkedIn CEO Ryan Roslansky (via The Transcript)

Many pundits have used the BLS Quits data to support the view that labor markets have normalized. They sure did vs the pandemic highs but note that Quits are still historically very high. The last data point below is April.

LinkedIn CEO, who has access to real time data, says that “we are starting to see people moving jobs more frequently again”.

As a reminder, the Atlanta Fed Wage Growth Tracker showed that wages for “Job Stayers” were rising 4.5% YoY in Q1 but wages for “Job Switchers” were up 5.2%.

For the Descent, Follow the Dots While the Fed still plots its course down from high rates, other central banks are starting off on their own.

Slowly, steadily and reluctantly, impatient central bankers in some developed markets are jumping ahead of the US to cut high interest rates that are weighing on their economies. Easing monetary policy before the Federal Reserve is far from ideal. Lower rates elsewhere lead to capital flow to the US. That puts pressure on local currencies — and increases the cost of servicing dollar-denominated debts for these countries. (…)

So far, the cost of cutting before the Fed hasn’t been as severe as feared. (…)

US economic data downloads in the past few weeks have been infuriatingly inconclusive when it comes to judging the timing of the first rate cut or the magnitude of easing for the rest of the year. Jay Powell, the Fed’s chairman, has remained dovish in the face of a string of first-quarter data that surprised to the upside. He insisted at his last FOMC press conference that rates were restrictive, and data since then hasn’t settled the debate. (…)

Indeed, the robust payroll data shouldn’t surprise the Fed. With minutes from the last FOMC showing that members expected unemployment to peak later this year and then fall, Bloomberg Economics’ Anna Wong argues the Fed’s interpretation will unravel the declining path for interest rates that’s still sketched out by markets:

If that’s how the Fed sees it, then they’re probably not too troubled by the rise in the unemployment rate – which has already reached the median participant’s 2024 forecast from the March Summary of Economic Projections — though the median is also likely to raise the 2024 unemployment forecast in the updated SEP. Rather, the Fed may continue to take a greater signal from robust nonfarm payrolls, leaning on the idea that immigration is supporting the labor market. (…)

Half of EM central banks are either cutting rates, or are on hold below their norm. The majority of developed markets are still on a plateau well above the norm.

Source: Bloomberg

The next move is about to come from the Fed. With employment data taking any chance of a summer rate cut off the table, the focus will be almost exclusively on the dot plot, issued quarterly, in which each FOMC member gives their prediction for the future course of fed funds, and for various economic measures. Last time, the median participant envisaged three cuts by the end of this year — although only one member would have needed to change their mind to move the median to imply only two cuts. It would be a major surprise if that doesn’t happen this week, with the fed funds futures market now implicitly predicting slightly less than two cuts by year-end. The key question now, with the Fed median currently 34 basis points below the market’s prediction, is whether the median member shifts to predict two cuts, or moves all the way to expecting only one.

If the FOMC does move the dots that far, it will complicate life for everyone else. This descent is going well so far, but the hazards aren’t over. It was never going to be easy.

The WSJ’s Nick Timiraos on plotting the dot plot:

(…) Because no meaningful policy changes are expected at this week’s meeting, the focus Wednesday will center on new quarterly rate projections, the so-called “dot plot.” In March, most officials penciled in two or three cuts this year; the median—or midpoint—of the 19 officials was at three, but just barely. That was before a third consecutive disappointing inflation report, which subsequently prompted investors to wonder whether the Fed would be able to cut rates at all this year.

Investors’ intense focus on the median projections, which has at times sown confusion, adds a potential rare element of surprise to the gathering for two reasons.

First, most of the blocking and tackling for Fed meetings happens in the days and weeks leading up to the gathering. But Wednesday faces a wild card because those rate projections could be revised depending on the Labor Department’s report for May inflation as measured by the consumer-price index. The report will be released at 8:30 a.m., around 30 minutes before policymakers typically reconvene for their second day of deliberations.

A disappointing inflation report could hold more officials to a projection of no more than one cut this year. A serene report could lead more of them to pencil in two cuts.

Second, those projections aren’t the result of committee deliberations, even though investors—and occasionally Fed officials—treat them that way. The difference between a median that shows no more than one rate cut versus a median of two or more cuts could be determined by just one or two policymakers.

The Fed meets again in July and September.

Many investors assume a median projection of two cuts would be needed to tee up a rate cut by September. A median of just one would imply rate cuts aren’t likely to start until even later in the year. “It would be taken as a pretty strong signal,” said Jan Hatzius, chief economist at Goldman Sachs.

Some officials who are on the fence about cutting twice this year could pencil in just one reduction to keep their options open. While the projections aren’t a promise of future action, some analysts have said a base case of one cut could be a way to effectively underpromise and overdeliver if inflation data turns out to be placid this summer. (…)

And notwithstanding potential cues from the dot plot, it could be difficult for officials to send a strong signal about that [September] meeting with three more months of data on inflation, hiring and spending between now and then.

China’s Call for ‘Open Mind’ Spurs Hope of New Housing Measures

China urged officials to keep an “open mind” over policies to reduce housing inventory, a signal that led Wall Street economists to predict new measures and additional funding in Beijing’s bid to shore up the market.

The State Council, the country’s cabinet, asked officials to keep formulating new policies that will absorb existing housing stock and stabilize markets, according to a statement posted on the government’s website late Friday before the start of a three-day public holiday. “We should steadily and concretely push forward the work of digesting and revitalizing existing homes and land with an open mind and broadened thinking,” it said. (…)

“Our interpretation is that the impact of the latest round of easing thus far may have been more muted than policymakers had expected,” Goldman Sachs Group Inc. economist Hui Shan wrote in a Sunday note about the cabinet statement. “If the property market still does not show more signs of improvements in the coming months, we think policymakers will likely introduce more funding and new measures to destock inventories and stabilize prices.”

The State Council’s reference to the need for open minds and broadened thinking could encourage local governments to be more creative and bold<?XML:NAMESPACE PREFIX = “[default] http://www.w3.org/2000/svg” NS = “http://www.w3.org/2000/svg” /> in rolling out supportive measures, JPMorgan Chase & Co. analyst Karl Chan wrote in a note. He expects stronger measures such as further easing of restrictions on home purchases restrictions, and relaxation of price caps in central areas of China’s biggest and most expensive cities, if sales in June and July disappoint. (…)

AI Corner

Axios sums up Apple’s AI strategy unveiled yesterday:

AI’s iPhone moment

The company’s approach, revealed yesterday and dubbed Apple Intelligence, envisions a future where a ubiquitous AI system that knows all about you can use that knowledge to surface the right information and take action on your behalf.

In contrast to the current chatbots — which know about the world, but little about you beyond what you tell them — Apple is building a context engine that understands each customer and the information and people that matter most to them.

Craig Federighi, Apple SVP of software engineering, described Apple Intelligence as “AI for the rest of us” — alluding to Apple’s 1980s slogan for Macintosh: “A computer for the rest of us.”

Bringing this bold vision to life depends on two key elements — technology and trust.

On the technology front, Apple may not be building the most advanced frontier models like Google, Meta or OpenAI — which struck a deal with Apple.

But given what it showed yesterday, the company seems further along than many thought.

Trust is where Apple has a real edge. The Apple Intelligence vision relies on access to a copious amount of personal data. The company can draw on a reputation for privacy that it has spent more than a decade fostering.

But Elon Musk ain’t trusting Apple:

• Musk threatens to ban employees from using iPhones

Elon Musk threatened to ban his employees from using Apple products after Apple announced that iPhone users would be able to ask ChatGPT questions through Siri, Apple’s voice assistant. (…)

“If Apple integrates OpenAI at the OS level, then Apple devices will be banned at my companies. That is an unacceptable security violation,” Musk posted on X Monday evening after Apple’s announcements.

• It’s not clear exactly what Musk means by “integrates…at the OS level,” or whether Apple’s description of how it plans to use ChatGPT in iOS would match most software developers’ definition of that kind of integration.
• Apple touted the privacy and security protections of the AI services it will provide itself, and showed off a prominent dialog box that will ask users whether they want a query to be forwarded to ChatGPT.

Musk has his own dog in the AI fight. He has raised $6 billion for his own AI company, xAI, to compete with OpenAI, Apple and every other AI provider.

Tesla promises to protect its customers from being tracked or having their data sold or shared.

• But Reuters reported last year that Tesla employees have spied on customers using the cars’ many cameras.
• Musk biographer Walter Isaacson wrote that Musk wanted to use cameras inside the cars to collect evidence to protect Tesla from lawsuits.

For better or worse, most of Big Tech’s customers have tended to prioritize convenience over privacy in the past, and today millions of people use ChatGPT.

While on cybersecurity, From TechCrunch via ADG:

Security researchers say they believe financially motivated cybercriminals have stolen a “significant volume of data” from hundreds of customers hosting their vast banks of data with cloud storage giant Snowflake.

Incident response firm Mandiant, which is working with Snowflake to investigate the recent spate of data thefts, said in a blog post Monday that the two firms have notified around 165 customers that their data may have been stolen.

It’s the first time that the number of affected Snowflake customers has been disclosed since the account hacks began in April. Snowflake has said little to date about the attacks, only that a “limited number” of its customers are affected. The cloud data giant has more than 9,800 corporate customers, like healthcare organizations, retail giants and some of the world’s largest tech companies, which use Snowflake for data analytics.

So far, only Ticketmaster and LendingTree have confirmed data thefts where their stolen data was hosted on Snowflake. Several other Snowflake customers say they are currently investigating possible data thefts from their Snowflake environments.

BTW: The Fed’s view on AI: There’s a lot more being used than you realize

“We are talking to firms of all different industries, and what we’re hearing are two things that might surprise you. First, AI is being used a lot more than you believe, and generative AI is being used a lot more than you might imagine. … So, the second fact, though, is that businesses are using it. The second fact that we hear is, yes, we’re using it, actively, but not for our most valuable prized products, the things that we’re selling that have a reputation. So, I’m going to use a – we did not talk to a rocket-making company, but I’m going to use it. It’s useful to understand. If you’re making rockets, you’re not using generative AI to build the rocket, and nobody’s [inaudible] employees anymore. You’re using it to do back-office operations, to look at early schematics, to [inaudible] research tells you about jet fuel or rocket fuel. You’re using it to have inputs to the process, but not to do these other ones. And that’s because, as repeatedly we’re told, it’s not ready yet.” – US Federal Reserve Governor Lisa D. Cook via The Transcript