Slowdown Watch

Apollo Chief Economist

The goods sector makes up 20% of US GDP and the services sector makes up 80%.

The goods sector of the economy is slowing down because growth in goods production and goods sales was very high during covid, and the goods sector consists of the more interest rate-sensitive components of GDP such as housing, autos, and capex.

The service sector, on the other hand, such as air travel, hotels, restaurants, concerts, sporting events, continues to show no signs of slowing down.

These diverging trends between goods and services are also visible in the inflation data we got earlier this week, see chart below. Goods inflation is slowing. Services inflation is rising.

The Fed is waiting for the services sector to slow down, which is not happening yet, see also our Slowdown Watch PDF with daily and weekly indicators for the US economy.

Goods sector inflation vs service sector inflation
Source: BLS, Haver Analytics, Apollo Chief Economist (Note: Goods = Commodities Less Food & Energy Commodities; Service = Services Less Energy Services

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