Services in the euro area today account for more than 50% of final consumption, compared with less than 40% in 1980. In the United States, households today spend nearly 70% of their consumption expenditure on services, and in Japan, this figure is 60%.
3 / 16  BIS central bankers' speeches  These developments have been studied widely in the literature.6 William Baumol’s famous “cost disease” channel, for example, predicted that lower productivity growth would raise the relative price of services compared with manufacturing, which in turn would affect the sectoral allocation of consumption and labour.7 You can see this clearly on my next slide.