RPT-ROI-Maybe the global economy isn't all about AI: Mike Dolan

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By Mike Dolan

LONDON, Feb 25 (Reuters) - Whether it leads to doom-laden depression or a productivity nirvana, the artificial intelligence juggernaut now dominates macroeconomic thinking as well as stock market bets. But if you unpick the details of impressive global industrial growth, the rest of the economy still packs a punch and AI is only part of the story.

The stock market is clearly obsessed with AI - and now increasingly focused on losers as well as the mega-cap winners.

Nvidia NVDA.O, the world's most valuable firm and easily the big winner from the AI boom to date, reports on Wednesday and offers a reality check on blistering capital expenditure and chip demand.

The flipside on Monday was IBM's IBM.N 13% share price plunge - the biggest one-day drop in 26 years for a grand old name in computing as AI lab Anthropic rolled out a new coding tool.

When you zoom out, consternation in some AI‑exposed sectors is masked by rotation into others. The main U.S. stock indexes are actually little changed for the year to date, and global stocks are doing better and are up about 4%.

Pull back further to view the U.S. macro economy, and the hundreds of billions of dollars in AI-related capex are a huge factor. But that's not the only one - and when you zoom out further still, the global economic picture shows AI is still only one part of what's happening across industry worldwide.

In a deep dive into last year's global industry rebound, JPMorgan economists Joseph Lupton and Maia Crook tried to disentangle it from the distortions of U.S. trade tariffs and the tech boom.

"Despite the most intense trade war since the 1930s, the global goods-producing sector outperformed services," they wrote, showing that last year's industrial output growth of 2.4% worldwide was more than twice the annualized 1% growth in the three years through 2024.

This marked a return to brisk growth as interest rates in many countries subsided from the brutal tightening of the 2022-24 period, although some of 2025's acceleration was flattered by front-loaded trade to beat U.S. tariffs and related uncertainties.

In fact, the JPMorgan crunch showed 1.6 percentage points of that 2.4% growth rate came in February and March in the rush to get ahead of U.S. President Donald Trump's April tariff sweep.

But they said forecasts of a significant slowdown or even reversal later in the year as the levies kicked in proved wide of the mark.

TARIFF PAYBACK NEVER HAPPENED

Some of that was down to sustained capex spending, where global tech production almost doubled last year to 9.1%.

But the fact consumer spending held up at all in the second half was just as important, as it accounts for at least twice the overall goods demand that capex does.

The tech capex push has been strong for a few years but "the driving force behind 2025's pickup was a return to growth in non-tech production," the JPMorgan economists said.

Optimism about global hiring should underpin that demand.

"Our call is that hiring picks up as business caution fades, leading to a handoff to a more sustainable income-driven expansion in consumer spending," the report continued, adding that capex looks to continue in parallel while there is some broadening of non-tech demand into 2026.

"Global industry should see a further 2%-3% annualized gain in output over the coming months," JPMorgan said.

If the AI capex story is the cherry on top of a broader global industrial sector that's already growing again, the intensity of the year ahead becomes easier to understand.

The big numbers on planned AI capex spend stateside are now well known. But the aggressive trade and geopolitical stance of the Trump administration is forcing other countries, most notably China, to invest heavily and locally in tech rather than plucking it off the shelves of benign U.S. digital giants.

Add to that government spending in defense and security worldwide, as well as tailwinds from U.S. tax cuts, Germany's infrastructure push and Japan's new fiscal plans, and you can see why many central bankers may be wary of loosening the monetary reins even further.

As this week's viral macro scare story from Citrini Research teased, all of that may have to be colored against worst-case scenarios of surging white-collar unemployment if AI eventually wipes out many tasks, companies or even industries.

But there's no clear evidence that's happening yet and it looks far-fetched as a factor this year at least.

As it stands, AI is not the only driver of global activity – there's still plenty of life in the old economy yet.

(The opinions expressed here are those of the author, a columnist for Reuters.)

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(by Mike Dolan; Editing by Marguerita Choy)

((mike.dolan@thomsonreuters.com; +44 207 542 8488; Reuters Messaging: mike.dolan.reuters.com@thomsonreuters.net/ @))