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Observer
3 hours ago
- Observer
Euro zone industry shrinks more than feared in June
FRANKFURT: Euro zone industrial output dipped more than expected in June even as overall economic growth held up in the second quarter, challenging views that the 20 nation currency union remains resilient to the fallout from a global trade war. Industrial output fell 1.3% on the month in June, driven by a big dip in Germany and weak consumer goods production, underperforming expectations for a 1.0% fall, data from Eurostat showed on Thursday. Adding to the negative surprise, Eurostat also revised its output growth estimate for May to 1.1% from 1.7%, suggesting that the underlying trend is weaker than thought. Meanwhile GDP grew by 0.1% on the quarter, in line with a preliminary estimate, and employment rose just 0.1% on the quarter, in line with expectations in a Reuters poll, but below the 0.2% in the previous three months. A recent string of relatively upbeat indicators from purchasing managers (PMI) data to the European Commission's sentiment reading have fuelled a narrative that consumption is keeping the bloc resilient to trade tensions, but more recent numbers, like industrial orders and a key sentiment reading from Germany, have challenged this view. Still, investors continue to bet on a modest upturn on the premise that a recent EU trade deal with the US provides much needed certainty and Germany's plans to sharply boost budget spending will support growth. This is why financial investors think the ECB may be done cutting interest rates and policymakers will sit out a temporary dip in inflation below the 2% target, as price pressures over the medium term are already building up. Growth is unlikely to take off, however, and the euro zone is facing modest expansion of only around 1% a year in the coming years, trailing other major economies, given structural inefficiencies. Compared to a year earlier, second quarter economic growth was 1.4%, a figure that is boosted by a one-off demand surge before US tariffs took effect. This figure is now seen slowing steadily before picking up in 2026. US stocks ended higher on Wednesday, with the Dow adding 1%, the S&P 500 gaining about a third of a percent, and the Nasdaq ticking up marginally. The monthly industrial fall was driven by a 2.3% drop in Germany and an 11.3% fall in Ireland, a figure that is unlikely to concern many, since Irish data is exceptionally volatile due to activity among big multinational companies, mostly in pharmaceuticals, based there for tax purposes. Industry figures showed that besides energy production, every sector took a dip last month, led by a 4.7% fall in non-durable consumer goods and a 2.2% fall in capital goods production. — Reuters
Observer
3 hours ago
- Observer
AI is a terrible therapist
In January, the venture capital firm Andreessen Horowitz announced that it had backed Slingshot AI, the world's first foundation model for psychology, bringing the startup's total capital to $40 million. A few weeks later, the European Union's AI Act, which includes a ban on manipulative AI systems, came into force. These two events highlight a troubling contradiction. Even as regulators attempt to protect users from deceptive AI practices, investors are betting that AI chatbots can treat people struggling with mental-health issues – in other words, when they are especially vulnerable to exploitation. Worse, the way that large language models are currently trained may make them fundamentally incapable of providing such treatment. The mental-health market is huge, and the use of generative AI is poised to expand significantly. The United States National Institute of Mental Health estimates that one in five US adults has a mental illness. But more than 122 million people in the US live in an area with a shortage of mental-health providers. This has given rise to a slew of AI chatbots that promise to fill the gap. Wysa, for example, calls itself the 'clinical alternative to ChatGPT' and claims to have helped six million people in 95 countries. But AI chatbots' behaviour is at odds with the delicate balance of empathy and confrontation that evidence-based psychotherapy requires. Mental-health professionals must validate patients' experiences while challenging the rigid thinking that perpetuates psychological distress. This productive discomfort helps patients examine their assumptions, driving meaningful change. Consider a patient who avoids social situations, claiming that they prefer solitude instead of acknowledging their social anxiety. A skilled therapist might gently challenge them by asking if something else is informing that preference – perhaps a fear of how others might react. This opens space for self-reflection without attacking the patient's conception of self. Current AI models tend to avoid such confrontations. In April, OpenAI rolled back the GPT-4o update because it was 'overly flattering or agreeable – often described as sycophantic.' Researchers have found that sycophancy is 'a general behaviour of AI assistants' that likely stems from the way these models are trained, particularly the use of human feedback for fine-tuning. When human evaluators consistently rate validating responses more favourably than challenging ones, AI assistants learn to echo, rather than question, the user. In mental-health contexts, this tendency towards agreement may prove problematic because psychological disorders often involve cognitive distortions that feel true to the individual and thus contribute to their distress. For example, depressed people tend to feel worthless or hopeless, while anxiety is often associated with catastrophic thinking. An AI chatbot programmed to be agreeable might reinforce these harmful thought patterns by focusing solely on validation, rather than introducing alternative points of view. As governments grapple with how to regulate AI, mental-health applications present unique challenges. While the EU's ban on manipulative AI is a good first step, it does not address the subtler problem of current models' excessive agreeableness. The US has no comprehensive federal laws or regulations for AI – and judging by President Donald Trump's AI Action Plan, none will be forthcoming. This regulatory gap will grow more dangerous as US venture capital firms increasingly pour money into AI tools that provide psychological support, and as these tools scale globally, reaching places where access to mental health care is even more limited. The mental-health market is huge, and the use of generative AI is poised to expand significantly. Addressing AI's sycophancy problem requires fundamental changes to how these systems are designed and used. Instead of optimising for user satisfaction, AI chatbots that provide mental healthcare should be trained to recognise when a therapeutic challenge is necessary. That could mean incorporating therapeutic principles and examples of effective therapeutic interventions into training strategies. Crucially, health professionals and patients must play a central role in developing these tools, given their insights into which therapeutic interactions are helpful and which are harmful. Meaningful patient involvement in design and deployment would ensure that the models serve end users' real needs, not what tech leaders assume they want. The global mental-health crisis demands innovative solutions, and AI will be an essential component. But if AI technologies are to expand access to quality care and promote long-term healing, investors should demand evidence of effective therapeutic outcomes before funding the next chatbot therapist. Likewise, regulators must explicitly require these technologies' developers to demonstrate clinical efficacy, not just user satisfaction. And policymakers should pass laws that mandate the inclusion of mental-health professionals and patients in the training of AI models aimed at providing this kind of care. Claims about AI revolutionising mental health care remain premature. Until it can master the very specialised ability of therapeutic confrontation – sensitively but firmly questioning patients' assumptions and offering alternative perspectives – it could end up harming those it is meant to help. @Project Syndicate, 2025
Observer
3 hours ago
- Observer
Trump aims to boost US space industry with less red tape
WASHINGTON: US President Donald Trump aims to stimulate the domestic space industry by cutting bureaucracy as the competition from countries like China and India heats up. In an executive order signed on Wednesday, the administration outlined plans to strengthen the US position in space by 2030 through a competitive market for launches, a significant increase in launch frequency, and "novel space activities." To achieve this, the government plans to simplify and accelerate approval processes for commercial licenses and US-based operators. The order says ensuring efficient launches and re-entries by US operators is "critical to economic growth, national security, and accomplishing federal space objectives." The policies will help maintain "American space competitiveness and superiority." The executive order sets deadlines for federal agencies, including NASA, to propose measures to reduce regulatory hurdles and identify conflicts with existing rules, such as environmental regulations. The US aims to return humans to the moon by 2027, decades after the last crewed US lunar missions, but ahead of other nations with ambitious space programmes such as China and India. Rapid commercialization and privatization have dramatically changed the space industry in recent years, intensifying the race for a leading position in the sector. — dpa
