Here's what kept GDP climbing last summer

What It Covers

The November Personal Consumption Expenditures index rose to 2.8%, reducing Federal Reserve rate cut odds. Third quarter GDP grew 4.4% annually, driven by private sector services including AI subscriptions, insurance, and financial services. Immigration policy threatens elder care workforce as 350,000 Haitians face temporary protected status termination.

Key Questions Answered

• •PCE Inflation Measurement: The Personal Consumption Expenditures index tracks broader price changes than CPI by incorporating substitution effects—when consumers switch from expensive beef to cheaper chicken. November data showed 2.8% inflation, with services, shelter, and food costs remaining elevated. This flexibility makes PCE the Federal Reserve's preferred inflation gauge for monetary policy decisions.
• •AI Services Drive GDP Growth: Information services led third quarter GDP expansion as businesses and academics purchased ChatGPT and Claude subscriptions for data analysis and code writing. This shift from manual coding to AI-assisted work represents measurable economic activity. Economist Ishwar Prasad demonstrates this trend by using AI to analyze financial datasets, freeing time for higher-level analysis work.
• •Tech Spending Creates Systemic Risk: Big tech companies invested $400,000,000,000 in data centers during 2025, exceeding consumer spending. This circular investment pattern—Microsoft investing $13,000,000,000 in OpenAI, which reinvests in Microsoft cloud services—creates interconnected financial exposure. Meta sold $30,000,000,000 in bonds for data center construction, raising concerns about too-big-to-fail scenarios if AI payoffs disappoint.
• •Immigration Policy Impacts Elder Care: South Florida retirement facilities employ 70% foreign-born workers, with 26 Haitian employees at Sinai Residences facing work permit loss in February. These certified nursing assistants earn approximately $40,000 annually in high-touch roles. Facilities must raise wages across licensed nurses, CNAs, maintenance, and culinary positions to compete for shrinking labor supply as baby boomers age.
• •Tariff Effects on Packaging Costs: Steel and aluminum tariffs at 50% increase tin can costs for food manufacturers like McCormick, which switched Old Bay seasoning to vintage-style tin containers. Plastic packaging remains stable due to low oil prices and domestic production. Equipment replacement parts from overseas face tariff impacts, affecting long-term packaging factory operations and maintenance budgets.