[Weekend Money] The Driving Forces Behind the Current U.S. Economy

Inventory Buildup and AI Demand Drive U.S. Economic Growth

It has been analyzed that efforts by companies to build up inventories in response to uncertainties from war and tariffs, along with strong demand for artificial intelligence (AI), are supporting the U.S. economy.

Image of Artificial Intelligence (AI) and robotic arm. Photo by Reuters.

On June 6, KB Securities pointed out in its report "The Driving Forces of the U.S. Economy: Inventory Accumulation and AI Demand" that the two key drivers currently leading the U.S. economy are demand for inventory accumulation and AI demand.

Economic indicators have exceeded market expectations, demonstrating robust performance. In May, the U.S. ISM (Institute for Supply Management) Manufacturing Index recorded 54%, surpassing the market forecast of 53%, and the ISM Services Index also reached 54.5%, higher than the expected 53.8%.

However, companies are proactively securing parts out of concern over rising raw material prices. In the ISM manufacturing survey, negative responses reached 69%, with significant concerns about the war in Iran (42%), price volatility (57%), and tariffs (18%). The report analyzed that such uncertainty has prompted companies to advance their pre-orders.

Shortages in corporate inventories are also increasing the pressure to accumulate stock. The ratio of inventories to sales in the manufacturing and retail sectors stood at 1.32 as of March this year, continuing a steady decline since reaching a peak of 1.43 in March last year. With inventories running low and external uncertainties rising, proactive demand for inventory accumulation has intensified.

Strong AI demand is also acting as a pillar for the economy. The ISM services report highlighted shortages not only in computers but also in construction materials, aircraft components, power and utility equipment, and piping for power generation projects, indicating that the explosive growth of the AI industry is fueling related infrastructure demand.

Ilhyeok Kim, a researcher at KB Securities, projected, "As AI demand rises and the pressure on companies to build up inventories increases, the likelihood of a significant economic downturn that would shrink financial markets remains low."

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