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Texas Service Sector Outlook Survey

Report in PDF
November 27, 2012

Texas Service Sector Activity Expands but at a Slower Pace

Texas service sector activity expanded in November, according to business executives responding to the Texas Service Sector Outlook Survey. The revenue index, a key measure of state service sector conditions, dipped from 13.5 to 11.1, suggesting slightly slower growth.

Labor market indicators reflected some employment growth, but no change in workweeks. The employment index edged up from 7.5 to 8.2, and the hours worked index was 0.7, suggesting little change in workweek length.

Perceptions of broader economic conditions were slightly less optimistic in November. The general business activity index edged down from 9.3 to 7.1. Similarly, the company outlook index fell slightly from 7.2 to 5.8, with 22 percent of respondents reporting that their outlook improved from last month and 16 percent noting they worsened.

Price pressures eased and wage growth slowed in November. The selling prices index fell from 8.3 to 6. The wages and benefits index moved down from 14.5 to 10.1.

Respondents were markedly less optimistic about expectations regarding future business conditions than last month. The index of future general business activity moved down 6 points to 6.9, and the index of future company outlook fell sharply to 1.4, its lowest reading since August 2011. Indexes of future service sector activity, such as future revenue and employment, fell in November but remained in solid positive territory.

Texas Retail Outlook Survey

November 27, 2012 

Retail Sales Growth Slows Further

Retail Sales Growth Slows Further

Retail sales increased at a slower pace in November, according to business executives responding to the Texas Retail Outlook Survey. The sales index fell from 11.3 to 6.8, its lowest reading since July. Inventories rose.

Labor market indicators reflected more hiring but no change in workweeks. The employment index rose from 3.5 to 6.7 in November. The hours worked index was 0.7, suggesting little change in workweek length.

Respondents were less optimistic about the broader economy than last month. The general business activity index fell from 13.2 to 7.8, its lowest reading in four months. The company outlook index also hit a four-month low, moving down from 8.5 to 3.2 in November. Twenty-four percent of respondents noted an improved company outlook over the prior month, compared with 21 percent who reported that their outlook had worsened.

Retail prices spiked and wages rose faster in November. The selling prices index jumped 14 points to 20.2. The wages and benefits index rose from 5.7 to 8.6, although the great majority of respondents noted no change in labor costs.

Perceptions of future broader economic conditions were notably less optimistic. The future general business activity index fell 12 points to 10.2, while the index of future company outlook moved down 11 points to 12.9. Indexes of future retail sector activity remained in positive territory in November with the exception of part-time employment.

The Texas Retail Outlook Survey (TROS) is a component of the TSSOS that uses information only from respondents in the retail and wholesale sectors.

The Dallas Fed conducts the Texas Service Sector Outlook Survey monthly to obtain a timely assessment of the state’s service sector activity. Data were collected Nov. 13–20, and 248 Texas business executives responded to the survey. Firms are asked whether revenue, employment, prices, general business activity and other indicators increased, decreased or remained unchanged over the previous month.

Survey responses are used to calculate an index for each indicator. Each index is calculated by subtracting the percentage of respondents reporting a decrease from the percentage reporting an increase. When the share of firms reporting an increase exceeds the share reporting a decrease, the index will be greater than zero, suggesting the indicator has increased over the prior month. If the share of firms reporting a decrease exceeds the share reporting an increase, the index will be below zero, suggesting the indicator has decreased over the prior month. An index will be zero when the number of firms reporting an increase is equal to the number of firms reporting a decrease. Data have been seasonally adjusted as necessary.

Next release: January 2, 2013

Texas Service Sector Outlook Survey

November 27, 2012
 

Click on links in the table for greater details. Historical data are available from January 2007 to the most current release month.

Business Indicators Relating to Facilities and Products in Texas
Current (versus previous month)
Indicator Nov
Index
Oct
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Revenue
11.1
13.5
-2.4
Increasing
37
31.9
47.3
20.8
Employment
8.2
7.5
+0.7
Increasing
33
19.6
69.0
11.4
Part-time employment
4.2
4.4
-0.2
Increasing
15
11.4
81.4
7.2
0.7
4.3
-3.6
Increasing
21
8.0
84.7
7.3
Wages and benefits
10.1
14.5
-4.4
Increasing
40
16.7
76.7
6.6
Input prices
28.4
31.7
-3.3
Increasing
43
30.2
68.0
1.8
Selling prices
6.0
8.3
-2.3
Increasing
23
13.2
79.6
7.2
Capital expenditures
6.9
13.4
-6.5
Increasing
39
17.7
71.6
10.8
General Business Conditions
Current (versus previous month)
Indicator Nov
Index
Oct
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
Company outlook
5.8
7.2
-1.4
Improving
15
21.6
62.6
15.8
General business activity
7.1
9.3
-2.2
Improving
13
22.3
62.5
15.2
Business Indicators Relating to Facilities and Products in Texas
Future (six months ahead)
Indicator Nov
Index
Oct
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Revenue
28.4
36.7
-8.3
Increasing
45
47.3
33.8
18.9
Employment
21.6
21.9
-0.3
Increasing
44
35.8
50.0
14.2
Part-time employment
8.0
10.3
-2.3
Increasing
5
17.1
73.8
9.1
1.0
8.0
-7.0
Increasing
39
10.1
80.8
9.1
Wages and benefits
33.3
40.4
-7.1
Increasing
71
40.2
52.9
6.9
Input prices
48.7
54.3
-5.6
Increasing
71
53.2
42.3
4.5
Selling prices
24.0
26.9
-2.9
Increasing
40
34.2
55.6
10.2
Capital expenditures
17.1
23.5
-6.4
Increasing
44
30.7
55.8
13.6
General Business Conditions
Future (six months ahead)
Indicator Nov
Index
Oct
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
Company outlook
1.4
13.0
-11.6
Improving
15
27.3
46.9
25.9
General business activity
6.9
13.2
-6.3
Improving
14
26.9
53.1
20.0

*Indicator direction refers to this month's index. If index is positive (negative), indicator is increasing (decreasing) or improving (worsening). If zero, indicator is unchanged.
**Number of months moving in current direction.
Data have been seasonally adjusted as necessary.

Texas Retail Outlook Survey

November 27, 2012
 

Click on links in the table for greater details. Historical data are available from January 2007 to the most current release month.

Business Indicators Relating to Facilities and Products in Texas, Retail
Current (versus previous month)
Indicator Nov
Index
Oct
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Retail Activity in Texas
Sales
6.8
11.3
-4.5
Increasing
4
32.1
42.5
25.3
Employment
6.7
3.5
+3.2
Increasing
16
14.3
78.1
7.6
Part-time employment
1.5
-2.9
+4.4
Increasing
1
9.2
83.1
7.7
Hours worked
0.7
4.4
-3.7
Increasing
5
11.9
76.9
11.2
Wages and benefits
8.6
5.7
+2.9
Increasing
27
14.8
79.0
6.2
Input prices
25.5
16.8
+8.7
Increasing
28
29.7
66.1
4.2
Selling prices
20.2
6.2
+14.0
Increasing
4
24.6
71.0
4.4
Capital expenditures
-1.5
12.8
-14.3
Decreasing
1
13.0
72.5
14.5
Inventories
14.7
18.6
-3.9
Increasing
17
31.4
51.9
16.7
Companywide Retail Activity
Sales
10.5
13.8
-3.3
Increasing
18
32.8
44.9
22.3
Internet sales
8.4
8.0
+0.4
Increasing
4
16.7
75.0
8.3
Catalog sales
-10.9
-2.3
-8.6
Decreasing
2
4.3
80.4
15.2
General Business Conditions, Retail
Current (versus previous month)
Indicator Nov
Index
Oct
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
Company outlook
3.2
8.5
-5.3
Improving
4
23.7
55.8
20.5
General business activity
7.8
13.2
-5.4
Improving
4
28.7
50.4
20.9
Business Indicators Relating to Facilities and Products in Texas, Retail
Future (six months ahead)
Indicator Nov
Index
Oct
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Retail Activity in Texas
Sales
42.1
45.3
-3.2
Increasing
45
54.3
33.5
12.2
Employment
18.8
21.6
-2.8
Increasing
35
31.3
56.3
12.5
Part-time employment
-1.5
2.8
-4.3
Decreasing
1
8.3
81.9
9.8
Hours worked
8.4
5.8
+2.6
Increasing
38
17.3
73.8
8.9
Wages and benefits
29.7
33.2
-3.5
Increasing
47
38.4
52.9
8.7
Input prices
52.3
40.0
+12.3
Increasing
43
56.9
38.5
4.6
Selling prices
38.5
32.3
+6.2
Increasing
43
46.2
46.2
7.7
Capital expenditures
13.8
8.1
+5.7
Increasing
20
29.2
55.4
15.4
Inventories
13.1
19.4
-6.3
Increasing
36
29.6
53.9
16.5
Companywide Retail Activity
Sales
42.1
39.5
+2.6
Increasing
44
52.4
37.3
10.3
Internet sales
31.1
21.8
+9.3
Increasing
44
33.3
64.4
2.2
Catalog sales
13.9
20.0
-6.1
Increasing
2
18.6
76.7
4.7
General Business Conditions, Retail
Future (six months ahead)
Indicator Nov
Index
Oct
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
Company outlook
12.9
24.3
-11.4
Improving
43
31.6
49.6
18.7
General business activity
10.2
22.0
-11.8
Improving
14
29.4
51.4
19.2

*Indicator direction refers to this month's index. If index is positive (negative), indicator is increasing (decreasing) or improving (worsening). If zero, indicator is unchanged.
**Number of months moving in current direction.
Data have been seasonally adjusted as necessary.

Texas Service Sector Outlook Survey

November 27, 2012

TSSOS Chart

Downloadable TSSOS chart: Low-res (72 dpi) | Hi-res (300 dpi)

 

Texas Retail Outlook Survey

November 27, 2012

TSSOS Chart

Downloadable TROS chart: Low-res (72 dpi) | Hi-res (300 dpi)

Texas Service Sector Outlook Survey

November 27, 2012

Comments from Survey Respondents

These comments are from respondents' completed surveys and have been edited for publication.

Pipeline Transportation

  • The major change for our company during this period is a strategic redirection away from more volatile businesses toward more stable businesses. Therefore, overall revenue declines, but profitability increases. We are also increasing capital spending on the more stable business lines.

Support Activities for Transportation

  • Declining international trade continues to depress business activity.

Publishing Industries (except Internet)

  • The results of the election—nationally and statewide—do not create any cause for caution. However, what the Congress does with the fiscal cliff creates some reservations right now.

Credit Intermediation and Related Activities

  • Regulation burden will hamper growth. We will be spending valuable resources and much personnel time to attempt to understand and implement the regulations. This will take away from being able to serve our customers. Also, the additional lending regulations will discourage customers from borrowing.
  • Banking regulatory demands are overwhelming.
  • We see slow improvement in the local economy. Deposit volume is down, improving loan-to-deposit ratios. Loan and investment return rates continue to slowly decline, squeezing profit margins.

Securities, Commodity Contracts, and Other Financial Investments and Related Activities

  • We are getting slower at the moment. The outlook is now turning negative.
  • The fall harvest is below average, and agricultural income is down. Local employment remains strong, but levels are flattening.

Funds, Trusts, and Other Financial Vehicles

  • Company revenues are highly dependent on security markets, which drive cost decisions. Although little change was seen between October and November, we anticipate better months ahead, although this does not necessarily lead to more hiring. Most of the cost increases are from normal compensation increases, our largest cost component, as well as inflation-indexed cost increases in purchased services. We have positioned ourselves in this quarter to grow in a cautious way over the next several years.

Real Estate

  • We see signs of slowing down. We are concerned about Dodd–Frank impacts and new health care reform.
  • We're seeing an increase in business postelection, possibly due to clients wanting to make real estate investment decisions prior to Jan. 1 and the looming fiscal cliff. We expect a slowdown in the first half of 2013 due to the fiscal cliff. Until there is clear direction that deficit spending and the debt will be addressed without massive tax increases, we see the economy remaining sluggish due to consumer caution.

Rental and Leasing Services

  • We are seeing some definite year-end capital expenditures to capture the last business tax advantages this generation will see. Then we think the economy will come to an abrupt halt as we enter another severe long-term recession.

Professional, Scientific and Technical Services

  • The fiscal cliff and unfriendly business climate of the current administration causes us great concern.
  • It's hard to plan when you have no idea what the federal government is going to do about its financial issues, taxes, etc.
  • We are not optimistic about the business climate after the U.S. election. We also continue to be very concerned about economic issues globally. Uncertainty in the current environment is causing our clients, and target clients, to table deals that were scheduled to take place, thus impacting our short- and medium-term plans for expansion, staffing, etc. We hope the environment changes around March 2013 but currently are not that optimistic about it. We will prepare for the worst, and hope things are better.
  • We continue to see increasing real estate activity in both residential and commercial markets, especially those in North Texas, so the outlook for the rest of this year is good. Commercial real estate activity, however, appears to be driven by capital gains considerations and the anticipation of an increase in federal income taxes on all levels of income next year. Residential activity locally appears to be the result of an increase in job formation, pent-up demand and a decrease in inventory. We believe there may be a state-mandated increase in the rates we charge for our product, which will result in an increase of revenues next year, if and only if, business levels of activity do not fall off as a result of fiscal policy changes.
  • We are concerned about rising costs for small business.
  • The future depends on the government managing the economy wisely. We can't predict wages, expenses and capital improvements right now.
  • Now that the election is over, we believe that business will improve if we can get beyond the fiscal cliff.
  • Despite the national fiscal uncertainty, we remain bullish on prospects for growth in the next 6–12 months. This, of course, is subject to rapid change as the White House and Congress reveal whether or not they can work to a rational, compromising resolution to their past stalemate.
  • Design and construction activity within the North Texas region is steadily increasing, requiring addition of employees. Much of the capital expenditure is associated with replacement of outdated equipment and computers.

Management of Companies and Enterprises

  • Overregulation is hurting our business and driving up our expenses, which are going to drive up the costs to our customers. Someone needs to insert some common sense on regulations.

Administrative and Support Services

  • Any business that can be moved offshore will be moved offshore. The federal government has created a very hostile environment for employers. The risks associated with having even one employee outweigh any potential returns.
  • Federal regulation has increased, and we expect that to continue.

Ambulatory Health Care Services

  • Health care service providers are exposed to the federal government focus on deficit reduction and health reform implementation. Significant but unknown factors are expected to be coming through in the next 12 months at a rapid pace for small and medium business service health care providers. This uncertainty is causing a holdback on all capital and business growth investments. Once the federal government and Congress resolve the deficit and health care reform initiatives, service providers will be able to focus on regrouping to align with the changes in business models.
  • We see about a 10 percent drop in business occurring around the time of election. It was more than seasonally expected.
  • We are 80 percent Medicare and 10 percent Medicaid. We are certain that there will be payment cuts coming through as a result of fiscal cliff negotiations.

Social Assistance

  • We have seen our retail store sales (same stores) decline significantly in the last six weeks. We are reviewing our operations to determine if it is an internal problem or external.

Food Services and Drinking Places

  • We will have to assess the impact of providing insurance for our employees and make cuts accordingly. The restaurant business has low margins; adding the cost of insurance will wipe out these margins. Hence, we will have to cut down our staff from 75 to 49, which also means we will have to cut down on the business itself. We are hoping there might be some relief for restaurants with over 50 employees. We need it.
  • We are seeing a slow but steady increase in our trend line as we move into the holiday season. It is a little too early to be certain, but it looks like we may have turned a corner and will have the first holiday season showing incremental growth above our price increases in the last three years. We have not increased enough yet to make a difference in our number of employees. We are more likely to increase hours than add employees, which will be our last choice given the expense of adding employees. Our benefit increase that will be effective in January was less than we anticipated. It was around 2 percent for the medical insurance. We expect cost of goods to increase over the six-month horizon, and we will increase prices around mid-December to compensate.
  • We have over 50 employees, and we are going to put most onto part time. We can't afford a $2,500 per employee penalty, and we surely can't afford the insurance. The future looks grim.
  • We are in a growth stage right now, currently adding new restaurants, so will continue to have an increase in spending, revenues and personnel for the foreseeable future.

Merchant Wholesalers, Durable Goods

  • We are still very concerned about water supply. Mexico is not holding up to the water agreement as they did before when the water supply is low.
  • Our business is improving, but we really can't enjoy it much due to concerns and uncertainties about what tax policy is going to be, how health care changes will affect our finances, how inflation will put a lid on future prospects and what the effect of inflation may be on an already weak dollar. We live in uncertain times, yet the American public seems content with allowing public policy to remain status quo.
  • Our company was hit with a major medical insurance increase of 50 percent for 2013. We are forced to pass on 100 percent of the increase to employees. In addition, our company will no longer match 401K contributions or offer profit sharing, and the company will no longer pay any portion of dependent medical care for employees.
  • Increase in revenues for November relates to our customers responding to the cleanup after Hurricane Sandy. There is pessimism after the election and concern about the impact the current administration will have on business activity.
  • Prior to the election, the general feeling about business opportunities among our glazing contractor customers was on a positive track. There was optimism about the improvement in the Texas regional and national economies. The election result neutralized these feelings. Next week, next month, next year(s) may be better … it’s a wild guess at this time.

Motor Vehicle and Parts Dealers

  • Our business is still a bit fragile until Washington figures out what to do, but it is going well based on faith and market stimuli.
  • There are too many unknowns, too much regulation.
  • We are extremely worried about the fiscal cliff, the national debt and the unforeseen future costs associated with health care. We will be very cautious about any expense that does not lead directly to income.

Building Material and Garden Equipment and Supplies Dealers

  • October 2012 was our busiest month ever (56 years).

General Merchandise Stores

  • The uncertainty of U.S. fiscal policy continues to inhibit consumer demand.

Texas Service Sector Outlook Survey

Historical Data

Historical data can be downloaded dating back to January 2007.

Indexes

Download indexes for all indicators. For the definitions of all variables, see Data Definitions.

Texas Service Sector Outlook Survey
 
Texas Retail Outlook Survey
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Seasonally adjusted excel   Seasonally adjusted excel

All Data

Download indexes and components of the indexes (percentage of respondents reporting increase, decrease, or no change). For the definitions of all variables, see Data Definitions.

Texas Service Sector Outlook Survey
 
Texas Retail Outlook Survey
Unadjusted excel   Unadjusted excel
Seasonally adjusted excel   Seasonally adjusted excel

Questions regarding the Texas Service Sector Outlook Survey can be addressed to Amy Jordan at amy.jordan@dal.frb.org.

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