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Services activity is starting to accelerate as in-person activity is taking place and goods activity is slowing as a large amount of demand was pulled forward in 2020.

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Economic activity is shifting toward services and away from goods as mobility and venue capacity increase.  Durable goods activity declined on a month-over-month (MoM) basis in April for the first time since April of 2020.  Durable goods are typically larger purchases that have long lives, so it was very likely that activity was going to slow from the strong pace in 2020. 

Source: Hedgeye.

This trend is also taking place in consumer spending data.  Personal Consumption Expenditures were flat MoM in April.  Services spending increased 0.6%, while durable goods declined by -0.90% and nondurable goods declined by -1.6%. 

The increase in services spending and ongoing supply/capacity constraints caused the Personal Consumption Expenditures Price Index to increase by 0.60% MoM in April.  That was the largest increase since June 2008.  Core (excluding fuel and food) increased by 0.70%, the most since October 2001. 

If economic activity continues to normalize and consumer incomes continue to recover, the shift from goods to services will likely continue to take place throughout the remainder of 2021.  The latest consumer conference board update provided some evidence of this as spending plans for the next six months for housing declined to the lowest level since February 2013.  Also, major appliances declined to the lowest level since September 2011 and automobiles declined to lowest level ever outside of the months following the start of the pandemic. 

If economic activity continues to normalize and services capacity continues to increase, this should benefit areas tied to consumer activity over areas tied to production of goods. 


The views expressed herein are presented for informational purposes only and are not intended as a recommendation to invest in any particular asset class or security or as a promise of future performance.  The information, opinions, and views contained herein are current only as of the date hereof and are subject to change at any time without prior notice.