The economy is experiencing surprisingly strong but fragile growth in 2025, driven significantly by AI's impact on investment and consumer wealth, leading to a bifurcated economic landscape with distinct outcomes for different sectors and income groups.
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Our next guest says we're entering a new
year in a bifurcated economy and that
its growth is fragile. Joining us is
Mark Xandy, chief economist at Moody's
Analytics. I just want to say, Mark,
hasn't the hasn't the economy surprised
you in a in a positive way this year?
There were so many calls, so many gloom
and doom calls, especially around the
Trump tariffs and what that would mean
for inflation and for the economy. And
here we are ending 2025 and it and it's
been quite strong.
>> Yeah. You know what's weird though? I
mean, I went back because I wrote this
piece on the this the 2026 outlook like
most economists do. And I went back and
looked at what my expectation was for
GDP growth in calendar year 2025 as of
December 2024. So a year ago, you know,
what would happen in 2025 and the GDP
growth number was 2.2%. So, you know, at
least back in December of 2025
or 2024, I thought 2025 would be an okay
year. But having said that, you know, as
we came in,
>> would you have said that in April after
the tariffs were were announced?
>> No, that's exactly where I was going.
Yeah, that I certainly would not have I
I would have thought that it would end
up being a much weaker year, something
closer to half that kind of growth rate,
like a 1% growth rate. And the thing
that you know obviously just it's pretty
obvious the thing that was the big
positive surprise was the impact of
artificial intelligence both you know in
terms of the investment spending but
most importantly through the runup in
stock prices and the wealth effects
that's generated and the effect that's
had on consumer spending. So you're
right you know as of April I was much
more pessimistic about the year it ended
up being much better than I anticipated.
>> So you say it's bifurcated is that
because in part of this the rising stock
market which has helped the wealthier
cohort. Yeah, in part I mean, you know,
it's uh there's such a dichotomy. When I
talk to folks, I you know, I get such a
a very perspective on the economy. Some
people are incredibly optimistic. Things
are booming. Other folks are incredibly
pessimistic. Things couldn't be worse.
And it and I think that goes just to the
fact that the economy itself is what the
word is bifurcated. It's just operating on
on
totally different levels. You can see in
lots of different ways. You know, large
companies, they're doing great. Smaller
companies, not so much. You can see that
in, for example, in the ADP data. You
can see high-end consumers, wellto-do,
they're their financial situation is
about as good as it's ever been. You
know, folks in the that are lower
income, middle income, not much
industries. I mean, the tech industry,
obviously, healthc care doing really
well, adding a lot a lot of jobs. But
then manufacturing and uh the real
estate industry, agriculture,
transportation just they're they're
literally contracting. They're in
recession. So I can go on and on and on.
You know the economy just feels very
bifurcated here moving on again
operating on different dynamics and
that's why I think people are getting
such different perspectives on thing. If
you add it all up, you know, the economy
is growing. It's okay. It's growing
around its potential, but it's a as I as
you said, it's a fragile growth. I mean,
I don't know that the economy can
operate this way for very long without,
you know, something going off the rails
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