US Macro: It is All About the Service Sector

Apollo Chief Economist

The FedEx results don’t tell us much about the broader economy because goods only make up 18% of GDP, and consumer services such as air travel, hotels, restaurants, sporting events, and concerts are not slowing down. The bottom line is that the goods sector in the economy continues to cool down, and consumer services continue to overheat, see chart below. For markets, the implication is that the Fed will continue to slow down the interest-rate sensitive goods sector, including housing and autos, while we wait for the service sector to show signs of cooling down.

The goods sector is less than 20% of GDP
Source: BEA, Apollo Chief Economist. Note: Chart shows share of value added of  goods producing industries which cconsists of manufacturing, construction, agriculture, forestry, fishing, and hunting; and mining.

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