Consumers have cut back on spending on goods because they went on a goods-buying binge on them during 2020 and 2021, when many services businesses were either closed or limited by social distancing restrictions. During 2022, they pivoted to spending less at retailers and more at services providers as they reopened (chart).
Consumers tend to determine the pace of economic activity. In a soft-landing scenario, they should continue to spend more on services as their outlays on goods remain sluggish. In a hard-landing scenario, they would retrench across the board.
