Global Weekly Economic Update: Insights from Deloitte
Week of August 25, 2025
Deloitte Insights presents its latest Global Weekly Economic Update, offering a comprehensive analysis of key economic trends and market developments from around the world. Drawing on proprietary research from Deloitte’s Global Economics Research Center and experts including Chief Global Economist Ira Kalish, the update sheds light on pressing issues such as the growing impact of generative AI on electricity consumption, shifts in US equity markets, and interpretations of recent Federal Reserve communications.
Growing Energy Demands Fueled by Generative AI
One of the standout concerns outlined in this week’s update is the significant rise in electricity consumption driven by data centers powering generative artificial intelligence (AI) technologies. In 2023, data centers accounted for 4.4% of the United States’ total electricity use. However, projections by the US Department of Energy indicate this figure could surge to 12% by 2028. This growth in demand presents a formidable challenge to US electricity generation capacity.
The supply side is constrained as new electric-generating capacity is increasingly sourced from renewables like wind and solar. In fact, 90% of the additional capacity added in the first eight months of 2024 came from these renewable sources. However, recent tax legislation has diminished some investment incentives for such renewable projects, potentially slowing further capacity growth.
Compounding the problem, US electricity prices have climbed sharply, with a 6.2% increase in July 2025 compared to the previous year, and a 33% rise since January 2022. This surge outpaces what earlier demand recovery post-pandemic might explain and is linked partly to data centers’ accelerating electricity needs.
Notably, geography affects price dynamics: regions with significant renewable energy capacity have seen more moderate price hikes, while areas with limited renewable infrastructure face steeper increases due to capacity shortages. Data center operators are increasingly building their own power facilities, often relying on fossil fuels, which could tighten fossil fuel supplies and drive related prices upward.
Higher electricity costs may reduce household disposable income, potentially restraining consumer spending growth. Additionally, energy-intensive industries like heavy manufacturing could face rising input costs, compounding inflationary pressures and possibly transferring them to customers.
Concentration of Generative AI Investments Shapes Equity Markets
Equity markets, particularly in the US, continue to feel the impact of concentrated investments in generative AI. Currently, nearly 40% of the S&P 500’s total market value is held by just ten companies, a sharp rise from 17% in 2015. This concentration also reflects sectoral clustering, with the top five companies all in the technology sector heavily committed to AI development.
This hyper-focus contrasts with 2005, when the largest companies spanned diverse sectors including energy, manufacturing, banking, and pharmaceuticals. Today’s tech firms dedicate a substantial portion of their cash flow toward investment in AI initiatives. Consequently, their free cash flow amounts to only about 2% of their combined market capitalization—one of the lowest levels historically.
While these investments underpin innovation and growth, the market’s dependency on technology creates heightened risk. A downturn in the tech sector, especially related to generative AI implementation, could disproportionately impact the entire stock market.
Federal Reserve Chair Powell’s Remarks Influence Markets
Federal Reserve Chair Jerome Powell’s recent comments at the Jackson Hole Economic Symposium have moved markets, with investors interpreting his message as signaling a potential shift to monetary easing. This expectation led to rising US equity prices and a weaker dollar.
Powell highlighted an unusual labor market dynamic this year, characterized by a simultaneous slowdown in labor supply and demand, influenced in part by changes in immigration policy. Despite this balance maintaining a stable unemployment rate, Powell warned of elevated risks of rapid increases in layoffs and unemployment if economic conditions deteriorate.
Assessing economic growth, Powell noted that real GDP expansion slowed in the first half of 2025, primarily due to weaker consumer demand. Interestingly, investment in information-processing equipment and software—bolstered by generative AI advancements—accounted for all GDP growth during this period, underscoring technology’s pivotal role.
Inflation trends remain mixed; tariffs have accelerated certain price increases, yet housing service inflation trends downward, and non-housing service inflation hovers slightly above historic 2% targets. Powell acknowledged that tariffs continue to influence inflation but left open interpretation regarding future policy adjustments.
Looking Ahead
Deloitte Insights continues to monitor these and other evolving topics across economics, technology, labor markets, and environmental trends. The weekly economic update serves as a valuable resource for organizations aiming to transform aspirations into informed action amid a rapidly changing global landscape.
For more detailed information and tailored research, Deloitte encourages businesses and leaders to visit their platform and explore resources from their specialized research centers.
Contact: Ira Kalish, Chief Global Economist, Deloitte Touche Tohmatsu, [email protected]
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