Leading Indicators | Is AI the answer to our productivity problem?
Discover key economic and financial metrics, and what to look out for in the week ahead
2 minutes to read
Here we look at the leading indicators commodities, trade, equities and more. in the world of economics. Download the dashboard for in-depth analysis into commodities, trade, equities and more.
MARKETS SHOCKED
Last week, the Bank of England (BoE) monetary policy committee (MPC) voted to lift its interest rate by +50bps to 5.00%, a move that was unexpected by some economists, and money markets, which had anticipated a +25bps hike. The BoE's decision came after UK inflation held steady at 8.7% in May, above BoE forecasts of 8.3%. Meanwhile, June's flash UK PMIs highlighted the challenge facing the MPC: momentum in activity is easing, but price and wage pressures remain. These inflationary forces will reassure the MPC of its decision to implement its largest rate hike since February. Since last week's decision, expectations for the UK's base rate have changed. Money markets are currently pricing in an interest rate of 6.00% this year, up from 5.50% last week. However, economist projections of the base rate peak vary between 5.25% - 5.75%, depending on the forecast house.
AI SAFETY UNIT TAKES SHAPE
In a further bid to make London the global home of AI regulation, Rishi Sunak has announced the creation of the UK's AI Foundation Model Taskforce. The Taskforce aims to lead AI safety research and assess the risks surrounding AI, and forms part of the government's aim to make the UK a science and technology "superpower" by 2030. The government has committed an initial £100m for the Taskforce.
AI is expected to raise Global GDP by 7% or by c.$7tn and lift productivity growth by 1.5ppts over the next ten years, according to Goldman Sachs. For the UK to benefit from this, the Taskforce aims to support businesses and public trust in these systems and drive their adoption.
IS WOOD THE WAY TO GO?
There are plans to build the world’s largest timber city in Sweden, named ‘Stockholm Wood City’. Once the $1.4bn 250,000 sq m project is complete in 2035, it aims to provide 2,000 homes and 7,000 offices together with retail offerings of restaurants and shops. Instead of predominantly using carbon-dense materials such as concrete and steel, the project will mainly use engineered timber to reduce its carbon footprint by 40%. Alongside the ESG benefits, with construction and material prices as high as they are currently, the use of timber in the UK could be a good option, as timber prices have moderated by up to -18% y/y in March 2023.
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