Australia's latest inflation data revealed a surprising 6.1% quarterly rise in prices for audio, visual, and computing equipment, the largest increase since records began in 1980. The Reserve Bank of Australia attributed this surge to higher memory-chip costs driven by demand for AI infrastructure, disrupting decades of falling prices for consumer electronics. On Nov. 3, the RBA raised its cash rate to 4.85%, citing AI-related investment as one of several sources of price pressure.
In the US, AI demand is reshaping the electricity market. PJM, the grid operator for 13 states and Washington, D.C., saw its summer auction for the 2028-29 delivery year generate about $16.4 billion in revenue. However, removing forecast growth in demand from new data centers reduced this figure to roughly $10.7 billion, a $5.7 billion difference. This highlights how AI-driven demand expectations are inflating power auction prices.
The effects of AI on inflation are becoming quantifiable, even as productivity gains remain unseen. Higher costs are reaching consumers who aren't directly using AI services, while institutions struggle to determine how much responsibility infrastructure-requesting companies should bear. In the US, computer prices rose 9.7% annually, while smartphone prices fell 9.9%. Despite these increases, their impact on overall household spending remains relatively small.
The Bank of England noted AI component demand as a global cost pressure but deemed its effect on UK inflation much smaller than energy shocks. Meanwhile, the Federal Reserve warned that inflation data may not fully account for software improvements, where subscription price hikes could reflect better quality rather than pure cost increases.