There are several signs that the US economy is beginning to lose steam. The labor market shows some weakness: job creation has slowed down significantly. This year, until the month of August, an average of 75,000 jobs had been generated per month, substantially less than the 143,000 monthly average for the same period last year. The main reason why it has not translated into an increase in the unemployment rate is that the labor supply has also been reduced, largely due to the immigration policies of the Trump Administration, which have resulted in fewer arrivals of migrants and a greater number of deportations. If continued, these policies could negatively affect the economy’s potential growth rate. Despite lower job creation, consumption remains resilient. Stock markets have grown throughout the year, driven largely by the expectation of lower interest rates and the possibility that the strongest measures of trade protectionism will be relaxed, which could bring even lower rates. The traditional components of investment show, however, an important weakness. Residential investment is in contraction, while non-housing construction is barely growing. Even so, total investment remains strong thanks to the boom in investment related to artificial intelligence (AI): data centers, as well as the development of hardware and software linked to AI. The big question is whether this wave of investment will translate into significant increases in productivity, which could raise the potential growth rate of the US economy, or if, on the contrary, it is a bubble that, when bursting, could bring financial problems and lower growth. Time will tell. If AI fails to represent a significant economic transformation, the prospects for the US economy going forward may not be as favorable. Furthermore, if it were a bubble, we could face a recession and episodes of financial instability. High fiscal deficits will increase public debt and put upward pressure on long-term interest rates, which will affect investment. Furthermore, protectionist trade policy will divert capital from more efficient sectors to less productive ones, thus reducing the overall efficiency of the economy. And, as I already mentioned, more restrictive immigration policies will limit labor supply, with an additional negative impact on growth. At BBVA Research we believe that the risk of a recession in the United States next year is low. The real question is what happens to the economy’s potential growth rate. Ultimately, the future of the US economy will depend on whether or not the promise of AI materializes.Carlos Serrano, BBVA Research.