Global economic resilience has come as a surprise in recent months, even as geopolitical tensions and higher energy costs have created fresh uncertainty.
Raphael Olszyna-Marzys, International Economist at J. Safra Sarasin Sustainable Asset Management, explores the growing influence of AI-driven investment on growth, and assesses and how shifting inflation dynamics are shaping expectations.
Economic activity data have generally held up better than expected over the past few months, despite oil prices fluctuating between $95 and 100 a barrel (bbl). Manufacturing sentiment indicators, such as the Purchasing Managers Indices (PMIs), have strengthened, largely thanks to the boom in AI-related investment. Yet resilience has been uneven.
Among the major advanced economies, the US and Japan have performed better than the euro area so far this year. Among emerging markets, China and economies integrated into the global AI supply chain have fared well, such as Korea and Taiwan, while other net oil importers have suffered from higher energy costs and the resulting deterioration in their terms of trade.
We have removed 2027 rate cuts from our forecasts
Prospects of a near-term reopening of the Strait of Hormuz have come down in recent days, with the US and Iran firing at each other again. Polymarket assigns only a 26% probability of normal traffic by the end of July. Yet we still believe that reopening the strait serves both parties’ interests, and have kept our oil price forecast for the end of the year at $80-90/bbl. The longer the stalemate lasts, however, the greater the strain on inventories and the risk that oil prices shoot up past $100/bbl.
Moreover, the disruption has now persisted long enough to generate indirect and second-round effects. Input costs are rising across economies and supply chain pressures are building. Even if they wish to, central banks cannot entirely ignore such a supply shock, and some tightening has become inevitable. Given our expectation of resilient global growth and higher inflation, we have removed all the rate cuts we had previously pencilled in for 2027.
The AI-infrastructure build-out has boosted US growth
In the US, the build-out of AI infrastructure remains an important source of growth. It added a full percentage point to domestic demand growth in the four quarters to 1Q26. It is also helping to contribute to a broadening of labour demand. Leisure and hospitality, together with healthcare and education, remain the largest sources of job creation, potentially helped by preparations for the World Cup. But cyclical sectors such as construction and durable-goods manufacturing are also adding jobs. We expect capex spending to remain strong throughout the year and labour demand to continue improving.
Consumption has been resilient
The outlook for US consumers is more uncertain. The war in Iran has caused prices to rise rapidly. Yet consumer spending has remained resilient. Between December 2025 and April 2026, nominal consumption rose by 2.5%, and real consumption by 0.7%, despite a drop in real disposable income. This resilience reflects a further decline in the savings rate and strong wealth effects.
But the longer the conflict persists, the greater the risk that spending growth slows to match income growth. Falling energy prices in the second half of the year, if our central scenario proves to be correct, and a stronger labour market should ensure that any weakness in consumer demand is temporary.
The balance of risks is shifting
The outlook for the Fed is changing. The balance of risks between inflation and the labour market had already begun to shift. The latest jobs report confirmed that labour demand bottomed out at the end of last year. At the same time, the risk of second-round inflation effects is increasing as long as the Strait of Hormuz remains closed. Cyclical inflation has probably reached its low point and is likely to pick up as the labour market tightens.
Wage growth to pick up next year
To be clear, this is primarily a story for 2027. The labour market is currently broadly balanced, and wage growth at 3.5% is not, in itself, inflationary. Yet the administration’s policy of zero-net migration implies a less elastic labour supply. All else equal, stronger wage growth will be needed to draw workers back into the labour force.
AI may put a lid on wage pressures
Of course, all else is not equal. One rapidly changing factor is the capabilities of AI models. Early evidence, including data from Indeed job postings, suggests that AI might be reshaping labour demand. Vacancies involving cognitive but repetitive tasks are losing ground relative to jobs where AI complements workers rather than replaces them.
If AI ultimately substitutes for a large share of such work, wage growth could remain contained. But the debate is far from being settled. Other metrics, such as those developed by the Yale Budget Lab, show little impact from AI, with the share of workers in AI-exposed occupations staying largely constant over the past few years.
