May 4, 2023 - Economy & Business

Service sector claws back after COVID shift toward goods

Data: FactSet; Chart: Axios Visuals

The economy continues to shift away from buying and selling goods — which was big during and after the pandemic — and back toward services, traditionally the driver of the U.S. economy.

Why it matters: Focusing on the slowdown in manufacturing, or falling commodities prices — such as crude oil — may obscure the importance of the service economy. That gives a false impression of how the economy is doing overall.

Be smart: Services — haircuts, restaurant meals, IT consulting, lending money and a vast swath of other activities in which people pay other people to do things for them — accounts for over 70% of the U.S. economy.

The latest: Updates this week from the Institute for Supply Management's surveys of manufacturing and services activity confirm the growing distinction between these two parts of the economy.

  • Manufacturing is clearly contracting, while services activity remains above the threshold — 50 — that separates shrinking from expansion.

The bottom line: The uptick in services, since it's such a large part of the economy, could outweigh the downward momentum we're seeing in goods.

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