The fact that European Central Bank () President Christine Lagarde implied that AI would trigger a financial crisis was ridiculous and without merit. President Trump had many leading technology executives appear at the G-7 for a special meeting that focused on AI. However, Lagarde said that AI can potentially lead to dangerous financial crises, and the ECB is determined to ensure that doesn’t happen. Specifically, Lagarde said in a speech in Venice on Wednesday that “We cannot stop artificial intelligence, even with our sound regulations,” and added, “What we can do, however, is prepare ourselves so that our citizens can benefit from it and be protected from its dangers, and that’s what we’re doing.”
Essentially, Lagarde was defending the EU’s Digital Services Act and the timing of her speech was designed to taint the influence of the technology executives at the G-7. This is just further evidence that Europe and the U.S. do not agree on technology and that the EU wants to continue to fine U.S. technology companies.
In the U.S., the Commerce Department announced on Wednesday that rose 0.9% in May, which was substantially higher than economists’ consensus expectation of a 0.5% increase. Fully, 11 of the 13 sectors surveyed rose in May. Sales at gas stations rose 3.4% in May, but it did not seem to curtail consumer spending. Vehicle sales rose 1.2% in May and were surprisingly strong.
The retail sales components that go into calculations, which excludes food services, auto dealers, building materials stores and gas stations, rose 0.7% in May, so I suspect that many economists will be revising their second quarter GDP forecast higher. I should add that China’s retail sales declined 0.6% in May, so the U.S. remains the economic engine of the world.