Morgan Stanley chief economist Stephen Roach believes services are now vulnerable to deflationary pressures:

Although deflationary pressures are building in a US-centric global economy, there is still a sense that the aggregate price level will stop short of outright contraction. Central to that belief is the long-standing dichotomy between goods and services. Unlike the tradable-goods sector, which is increasingly exposed to the tough competitive pressures of cross-border trade, the so-called non-tradable services sector has long been shielded from such pressures. That was then. The globalization of services changes all that, and points to the possibility of a new leg of deflation in the United States and the world at large.