WSJ What’s News - The AI Boom Is Driving GDP Growth

Episode Date: April 30, 2026

P.M. Edition for April 30. GDP rose 2% for the first three months of the year, rising from the previous quarter but not as fast as economists were expecting. Greg Daco, chief economist at EY-Parthenon, joins to discuss the business investments fueling that growth. Plus, U.S. national debt now exceeds 100% of GDP. Hear from Journal investing columnist Spencer Jakab on how that could affect government activity. And the latest tech giant reports: Apple profit margins and revenue top Wall Street expectations. Alex Ossola hosts. Sign up for the WSJ's free What's News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

How much of your workday is actually work, and how much is just hunting for information? That's the problem Amazon Quick was built to solve. Quick is an intelligent workplace assistant that connects all your systems, your documents, dashboards, Salesforce, Jira, Slack, email, and gives you complete answers in seconds and turns them into action. Create a deck, update a ticket, send a message, right there in the conversation without switching tools. It's AI that actually works the way you do. Learn more at aWS.com slash quick.

First quarter GDP gets a big boost from business spending. We have firms that are extremely focused on AI investment, and they're driving most of the momentum. And the U.S. national debt now exceeds GDP, a once unthinkable threshold. Plus, the House approves a bill to fund most of the Department of Homeland Security, but not ICE. It's Thursday, April 30th. I'm Alex O'SA for the Wall Street Journal. This is the PM edition of What's News, the top headlines and business stories that move the world today. A new piece of important economic data came in today, GDP. It rose at a 2% rate in the first quarter.

That's better than the half a percent from the end of last year when government shutdown was a big drag. But the first quarter was still a bit lower than economists expected. To dig into what's behind the numbers, I'm joined now by Greg Dachow, Chief Economist at EYPars. the economy's main engine, of course, is consumer spending that softened in the first quarter to 1.6% from 1.9% in the fourth quarter. What's driving those changes and what do we know about how people are spending now? I think in general people are being increasingly cautious. We are in this environment where income growth is decelerating and inflation is accelerating. So spending power is diminishing and that is increasingly a restraint on consumer spending activity.

The encouraging thing is that we have a bifurcated consumer landscape. So affluent consumers are still doing their fair share of spending, but lower to median income households are increasingly struggling in the face of these headwinds, and as a result, they're spending at a slower clip. Since the end of February, when the Iran War started, gas prices have increased 44%. Does that mean that we're going to be seeing even more pressure on consumer spending moving forward? We are going to continue to see the pressures from the Middle East conflict affect consumer spending in a negative way. Now, in the first quarter, we were encouraged by the fact that

we had higher than usual tax refunds coming from the one big, beautiful bill, but those were largely offset by the higher cost of gasoline, and they will continue to be offset by these higher prices. And we're going to see these higher energy prices filter through to transportation costs, filter through to airfare, and also filter through to higher food prices. The inflation landscape is going to be more restrictive in terms of consumer spending capacity. One of the other things we saw in the numbers today was that business spending picked up a lot during the quarter. It rose more than 10%.

What kind of businesses are doing that spending? And what are they spending on? We have essentially a bifurcated landscape when it comes to business investment. We have firms that are extremely focused on AI investment, and they're driving most of the momentum. In fact, if you look at the GDP data for the first quarter, you saw that there was a surge in business equipment spending. on info and processing equipment, as well as a surge in intellectual property products.

That's R&D, that's software investment, and that is all tied to AI. And those were the major factors that were driving business investment and, in turn, GDP activity. Are there risks to the economy to have so much spending concentrated in one area? It is a risk. And I have spoken in the past about the three fragile A-pillars of growth, affluent consumers, AI investment and NASA price appreciation. When you have three narrow pillars of growth, it is encouraging when you have a virtuous cycle, but if there is a shock to one of these pillars, it will expose underlying fragilities in terms of economic momentum. Outside of AI, we're seeing more hesitation

when it comes to investing, when it comes to hiring, and that is curbing the underlying potential for growth in terms of private sector activity. That was Greg Dachau, Chief Economist at EY Parthenon. Thanks, Greg. Thank you. With the latest GDP numbers comes a sort of scary-sounding milestone. The U.S. national debt now exceeds 100% of gross domestic product. The government is spending $1.33 for every dollar it collects in revenue. It's not the first time the debt's topped GDP, and that number might bounce around a bit. There also isn't some special level where debt goes from problematic to catastrophic.

But it is a symbol of the fiscal stresses on the U.S. that have been building for decades. Investing calmness Spencer Jacobs says the debt is already weighing on the government's budget. It gives the government less room for maneuver. I mean, just think if there's a pandemic or a recession, you already have a large deficit. You already have a lot of borrowings. You can't just necessarily write a blank check. And it squeezes the actual spending power of the government. You know, as more and more money is dedicated just to servicing the debt, there's less money to spend on actual things the government does. But Spencer says politicians keep spending. The budget deficit as a share of GDP today is at a level that you typically only see during deep recessions when the government is trying to sort of pump up the economy and get us out, not in the middle of a boom like we're having now.

In markets, the Dow led today's gains, closing up 1.6%. And the S&P and NASDAQ closed out one of their best months in years. The NASDAQ ended April with a gain of more than 15%, the biggest since, early 2020. It was also the S&P's best months since 2020. It had a 10% gain. Several big American companies said AI spending is benefiting their businesses, like Alphabet, Qualcomm, and even Caterpillar. Data centers need the power generators Caterpillar makes. Not all tech stocks climbed, though. Meta and Microsoft slid on concerns about the cost of that AI buildout. And in other earnings, Apple reported sales and gross profit margins for its most recent quarter that exceeded Wall Street's

expectations. iPhone's revenue rose more than 20% to nearly $57 billion. For more on the earnings, visit WSJ.com. And Eli Lilly has raised its forecast for the year after a strong quarter. Booming sales of its weight loss drugs fueled strong revenue and profit growth in the first three months of the year. Sales of Malajaro more than doubled while Zepbound sales rose 79%. Lily is dominating in the anti-obesity drug market and it's seeking to grow its share with its new weight loss pill. stock closed up about 10% today. Heads up that we dropped a special bonus episode earlier today. In the latest what's news and earnings, we look at what the rising cost of jet fuel has

meant for the airline industry. And for travelers like me, who recently shelled out $400 a ticket for a round-trip flight from New York to Atlanta. Ouch. Anyway, that's in your what's news feed now. Coming up, another insurer leaves the Affordable Care Act marketplace and a big development in a hotly contested Senate race in Maine. That's after the break.

How are the U.S. businesses of Philip Morris International invested in America? We're invested in advancing science, giving adults who smoke better options. We're invested in American manufacturing, helping local economies thrive. We're invested in community, supporting military veterans and their families, disaster relief, and economic empowerment. Because we're proud to be invested in America. See how at uspMI.com. Turning to Washington, the House has approved a long-delayed measure to fund most of the Department of Homeland Security.

It funds the Coast Guard, FEMA, and TSA, and the bill now goes to President Trump for his signature. You may have noticed that absent from that list of agencies is ICE. Republicans are going to try to get legislation funding ICE and border control separately. President Trump is withdrawing his nomination of doctor and health food. advocate Casey Means to serve as U.S. Surgeon General. She didn't have enough support in the Senate to get confirmed. The president said today that he would instead nominate Nicole Sapphire for the role. She's the director of breast imaging at Memorial Sloan Kettering Cancer Center Monmouth and a Fox News contributor. And turning to Maine, which is crucial to Democratic hopes of retaking the Senate, Janet Mills,

the state's Democratic governor, today dropped out of the Senate race. She said she didn't have the financial resources to keep going. Her exit. all but secures the Democratic nomination for progressive Graham Platner, an oyster farmer and marine veteran. He'll face off against Republican Senator Susan Collins, who has held the seat since 1997. The business of Affordable Care Act Health Insurance has been hit hard by the loss of some federal subsidies. Plans have gotten more expensive and people are dropping them. And today, Cigna says it's not going to offer those plans anymore starting next year. That's after Aetna dropped out of the market at the start of this year. SIGNA's not a very big player in the

ACA market, with about 369,000 people enrolled in its plans. On a wheel D. Matthews, who covers health insurance for the journal, says Cigna's exit is a sign of trouble in the broader ACA business. Since the start of the year, a lot of people have just not paid and have been dropping out. Actuaries and insurers are projecting that overall enrollment could drop by maybe a quarter this year versus what it was last year, which was around 24 million. So what it really shows is just turmoil, a shrinking market. and maybe an unstable market for the moment.

Ana says ACA premiums are expected to keep climbing. Insurers are right now actually making their filings with state regulators for their rates for 2027. And it does seem likely they're going to ask for significant premium increases in a number of markets. That said, very few people in the Affordable Care Act marketplace actually pay the full premium. Most people still do get a subsidy. And so premiums go up that they do not bear the full brunt of that. In other health care related news, the Justice Department is launching a new health care fraud strike force.

The unit will focus on Medicare and Medicaid fraud on the West Coast. Criminals targeting health programs have followed the growing number of people retiring out West, and they're costing taxpayers billions of dollars. And finally... And David, I'm going to ask you to take the down elevator. You're fired. Could the apprentice be coming back? The journal has learned that Amazon is discussing. a potential reboot of the reality TV show that made Donald Trump a household name.

Amazon executives have talked about casting Donald Trump Jr., President Trump's oldest son, as the host of a new version of the show. An Amazon spokesman said there's been preliminary internal discussions about what's next for The Apprentice as a brand, but that the show isn't in active development. Spokespeople for the White House and the Trump family didn't respond to requests for comment. And that's what's news for this Thursday afternoon. Today's show is produced by Anthony Bansy with supervising producer Tali Arbell. I'm Alex O'Sullough for the Wall Street Journal.

We'll be back with a new show tomorrow morning. Thanks for listening. Access to affordable credit helps me pay my employees that I don't really need it. Infliction is killing me. But who cares? Big retailers are making record profits. That's why we support the Durban Marshall Credit Card Bill. See?

Banks and credit unions help small businesses make payroll. This bill would cut the vital resources they need. While increasing megastore profits, they deserve it. Don't they? Tell Congress, stop the Durban Marshall money grab for corporate megastores. Paid for it by the Electronic Payments Coalition.