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Texas Service Sector Outlook Survey

Report in PDF
September 1, 2015

Texas Service Sector Activity Continues to Increase but at a Slower Pace

What's New This Month

For this month's survey, Texas business executives were asked supplemental questions on employment expectations and the labor market. Results for these questions from the Texas Manufacturing Outlook Survey (TMOS), Texas Service Sector Outlook Survey (TSSOS) and Texas Retail Outlook Survey (TROS) have been released together. Read Special Questions results.

Texas service sector activity continued to reflect expansion in August, according to business executives responding to the Texas Service Sector Outlook Survey. The revenue index, a key measure of state service sector conditions, remained positive but retreated from 19.1 to 9.3.

Labor market indicators reflected slower employment growth and slightly longer workweeks this month. The employment index fell 4 points to 6.1. The hours worked index dipped from 5.3 to 2.3.

Perceptions of broader economic conditions reflected less optimism in August. The general business activity index declined from 7.9 to 2.1. The company outlook index moved down 6 points to 2.8, with 16 percent of respondents reporting that their outlook improved from last month, compared with 13 percent noting that it worsened.

Price and wage pressures eased this month. The selling prices index edged down to a reading near zero, indicating prices were unchanged from July. The wages and benefits index fell slightly from 14.8 to 12.9, suggesting labor costs increased at a slower pace than in July, although the great majority of firms continued to note no change in compensation costs.

Respondents’ expectations regarding future business conditions reflected less optimism in August. The index of future general business activity fell sharply from 20.6 to 9.7. The index of future company outlook dropped from 21.3 to 12. Indexes of future service sector activity, such as future revenue and employment, also reflected less optimism this month.

Texas Retail Outlook Survey

September 1, 2015 

Retail Sales Fall

Retail Sales Fall

Retail sales declined in August, according to business executives responding to the Texas Retail Outlook Survey. After two consecutive months in positive territory, the sales index plunged from 11.5 to -3.6. Inventories increased at the same pace as last month.

Labor market indicators worsened in August. The employment index fell sharply from 7 to -4.2, indicating retail jobs decreased this month. After bouncing into positive territory last month, the hours worked index slipped back into negative territory to a reading of -4.9, suggesting shorter workweeks.

Retailers’ perceptions of broader economic conditions reflected less optimism this month. The general business activity index fell from 5.3 to a reading near zero. The company outlook index remained positive but declined from 12 to 3.3, with 19 percent of respondents noting an improved company outlook over the prior month, compared with 15 percent reporting their outlook had worsened.

Retail price and wage pressures eased in August. The selling prices index fell to its lowest reading this year at -3.6, indicating retail prices decreased this month. The wages and benefits index moved down almost 6 points to 1.6, indicating labor costs were largely unchanged from last month.

Retailers’ perceptions of future broader economic conditions continued to reflect optimism in August. The index of future general business activity fell from 27.2 to 19.8. The index of future company outlook edged up from 20.3 to 22.9. Indexes of future retail sector activity reflected less optimism this month.

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 Aug. 18–26, and 266 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: September 29, 2015

Texas Service Sector Outlook Survey

September 1, 2015
 

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 Aug
Index
Jul
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Revenue
9.3
19.1
-9.8
Increasing
70
25.7
57.9
16.4
Employment
6.1
10.1
-4.0
Increasing
66
14.5
77.1
8.4
Part-time employment
4.4
6.4
-2.0
Increasing
22
10.6
83.2
6.2
2.3
5.3
-3.0
Increasing
5
9.0
84.3
6.7
Wages and benefits
12.9
14.8
-1.9
Increasing
71
16.3
80.3
3.4
Input prices
17.1
20.8
-3.7
Increasing
76
23.4
70.3
6.3
Selling prices
-0.9
1.8
-2.7
Decreasing
1
8.1
82.9
9.0
Capital expenditures
11.4
7.7
+3.7
Increasing
72
18.3
74.8
6.9
General Business Conditions
Current (versus previous month)
Indicator Aug
Index
Jul
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
Company outlook
2.8
8.8
-6.0
Improving
5
16.0
70.9
13.2
General business activity
2.1
7.9
-5.8
Improving
4
16.7
68.7
14.6
Business Indicators Relating to Facilities and Products in Texas
Future (six months ahead)
Indicator Aug
Index
Jul
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Revenue
35.2
44.2
-9.0
Increasing
78
48.1
39.0
12.9
Employment
20.9
25.8
-4.9
Increasing
77
33.2
54.5
12.3
Part-time employment
8.3
8.2
+0.1
Increasing
38
17.7
72.9
9.4
5.3
5.6
-0.3
Increasing
21
11.6
82.1
6.3
Wages and benefits
39.1
39.1
0.0
Increasing
104
42.1
54.9
3.0
Input prices
44.8
43.7
+1.1
Increasing
104
49.7
45.4
4.9
Selling prices
23.1
24.2
-1.1
Increasing
76
30.6
61.9
7.5
Capital expenditures
22.6
25.5
-2.9
Increasing
77
31.6
59.5
9.0
General Business Conditions
Future (six months ahead)
Indicator Aug
Index
Jul
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
Company outlook
12.0
21.3
-9.3
Improving
48
24.6
62.8
12.6
General business activity
9.7
20.6
-10.9
Improving
47
23.3
63.0
13.6

*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

September 1, 2015
 

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 Aug
Index
Jul
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Retail Activity in Texas
Sales
-3.6
11.5
-15.1
Decreasing
1
20.2
56.0
23.8
Employment
-4.2
7.0
-11.2
Decreasing
1
4.3
87.2
8.5
Part-time employment
5.5
0.0
+5.5
Increasing
1
14.8
75.9
9.3
Hours worked
-4.9
6.0
-10.9
Decreasing
1
7.7
79.7
12.6
Wages and benefits
1.6
7.5
-5.9
Increasing
54
6.1
89.4
4.5
Input prices
-2.1
9.7
-11.8
Decreasing
1
15.6
66.7
17.7
Selling prices
-3.6
5.0
-8.6
Decreasing
1
13.6
69.2
17.2
Capital expenditures
8.7
6.9
+1.8
Increasing
22
17.5
73.7
8.8
Inventories
8.5
8.3
+0.2
Increasing
5
23.2
62.1
14.7
Companywide Retail Activity
Sales
5.0
28.1
-23.1
Increasing
3
25.2
54.6
20.2
Internet sales
-2.4
10.8
-13.2
Decreasing
1
7.9
81.8
10.3
Catalog sales
8.8
10.8
-2.0
Increasing
5
8.8
91.2
0.0
General Business Conditions, Retail
Current (versus previous month)
Indicator Aug
Index
Jul
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
Company outlook
3.3
12.0
-8.7
Improving
5
18.7
65.9
15.4
General business activity
-0.2
5.3
-5.5
Worsening
1
17.7
64.4
17.9
Business Indicators Relating to Facilities and Products in Texas, Retail
Future (six months ahead)
Indicator Aug
Index
Jul
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Retail Activity in Texas
Sales
30.7
34.5
-3.8
Increasing
78
45.9
38.9
15.2
Employment
9.3
15.1
-5.8
Increasing
6
24.0
61.3
14.7
Part-time employment
-5.0
-9.2
+4.2
Decreasing
2
13.8
67.4
18.8
Hours worked
3.8
4.7
-0.9
Increasing
3
13.5
76.8
9.7
Wages and benefits
30.2
23.6
+6.6
Increasing
78
34.0
62.3
3.8
Input prices
25.5
23.2
+2.3
Increasing
76
38.2
49.1
12.7
Selling prices
23.6
28.3
-4.7
Increasing
76
34.5
54.5
10.9
Capital expenditures
21.8
14.3
+7.5
Increasing
53
32.7
56.4
10.9
Inventories
12.3
9.1
+3.2
Increasing
69
27.4
57.5
15.1
Companywide Retail Activity
Sales
36.0
31.3
+4.7
Increasing
77
47.2
41.6
11.2
Internet sales
22.2
25.0
-2.8
Increasing
77
27.8
66.7
5.6
Catalog sales
7.2
14.2
-7.0
Increasing
7
9.9
87.4
2.7
General Business Conditions, Retail
Future (six months ahead)
Indicator Aug
Index
Jul
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
Company outlook
22.9
20.3
+2.6
Improving
77
32.8
57.3
9.9
General business activity
19.8
27.2
-7.4
Improving
5
34.2
51.4
14.4

*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

September 1, 2015

TSSOS Chart

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

 

Texas Retail Outlook Survey

September 1, 2015

TSSOS Chart

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

Texas Service Sector Outlook Survey

September 1, 2015

Comments from Survey Respondents

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

Credit Intermediation and Related Activities

  • Compliance costs and activity continue to increase. Technology expenses have increased and will continue to increase, with emphasis on constant attempts to maintain security for our bank and customers. Lending activity has been steady with slight growth and is expected to increase gradually going forward as new markets expand.
  • The wild card in the local economy is clearly related to the future of energy prices. A sustained period at current levels would continue to erode employment and real estate values in the Houston economy. Otherwise, all indicators are improving.
  • We are definitely seeing more and better job candidates that are being laid off in the oil and gas industry. So while we are adding employees for our growing company, we don't see any wage pressure.

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

  • Our area is seeing weak job growth and lower commodity prices. This has impacted construction.
  • Business for the last two reportable months has moved lower by about 20 to 25 percent. Prices of oil and natural gas are reflecting in our business activity. Sales volume is down and pricing has decreased. We have made the appropriate adjustments for the longer term. We anticipate this business atmosphere will be with us for a long while.

Professional, Scientific and Technical Services

  • Although our revenue and orders continue to outpace 2014, we are becoming more cautious about the coming year due to the volatility of the stock market and what effect it may have on the overall economy. The real estate market will be helped with the low 10-year yield, but only if we continue to see growth in the economy. We think the next couple of months should give us a clearer picture of what the future holds.
  • A couple of client budget cuts reduced our revenue.
  • The uncertainty about China is frightening everyone. Today's Dow is causing skittish behavior. Activity has slowed, and we hope that confidence can be restored. It is a time of global uncertainty and that is not good for business.
  • Decreasing energy prices will have a resounding impact on our business and the economy in Texas as a whole. Until recently, management has been attempting to hold on; however, recent declines may make this alternative no longer feasible.
  • The exisiting business environment is very strong. We do not foresee any change in the volume of available work over the next six months.

Management of Companies and Enterprises

  • There is way too much government regulation. It drives up our costs and hurts our ability to help our customers. Some of the regulations make sense, but we think a lot of them are silly and don't accomplish anything.
  • Federal government regulatory mandates create a huge expense that can not be offset by charges to customers anymore. It is past time for community bankers to exit this industry.

Administrative and Support Services

  • Demand for full-time employees continues to be extremely soft, and companies that are interested in hiring are moving very slowly and being very picky. We think they are looking for reasons to rule candidates out rather than for reasons to hire. Contract demand also continues to be slow but we are increasing headcount a little.
  • Lower fuel prices continue to impact sales in the public transportation industry.
  • Revenues and profits are improving, but we see very little movement in wages and salaries despite rising rental and home costs in Dallas.
  • We have a diversified customer base and certain sectors—such as restaurants—are affected by the increase in wages and food costs, while the manufacturing and energy sectors have been affected by the decrease in oil prices. Real estate has been positive, but they are concerned about competition and overbuilding in areas. Overall, we see a cautious outlook by all groups as they look to the near future and the potential for setbacks in the economy.

Telecommunications

  • We are starting to feel the pressure and see a reduction in activity from the low price of oil in Houston.

Waste Management and Remediation Services

  • Overseas markets may have a ripple impact on our revenue.

Ambulatory Health Care Services

  • Recent rains will help the agricultural community but probably will not offset the decline in the price of oil. The outlook for the Texas and Oklahoma panhandles trends down for the next several months based on oil and gas prices and agricultural commodity prices being low.

Hospitals

  • Rural hospitals continue to face increased regulation with lower reimbursements. The wage index numbers released this month will reduce reimbursements by an additional 10 percent. Smaller independent hospitals are going to struggle to remain solvent with continued requirements from the government lacking support funding.

Religious, Grantmaking, Civic, Professional and Similar Organizations

  • With oil prices likely to be lower for longer, the outlook for our organization has become much worse over the past month.

Amusement, Gambling and Recreation Industries

  • The unemployment rate in Austin is very low. It has become extremely hard to hire skilled workers—particularly cooks, good waiters and bartenders. It is not uncommon for these skilled folks to have five to six interviews for good jobs. We see this competition for top-level employees getting more and more challenging as there are going to be several new hotels and restaurants opening in the next several months. This is certainly putting upward pressure on wages and benefits.

Food Services and Drinking Places

  • Our sales have slowed down significantly in August. We are still up over last year but only by a very narrow margin now. Capital expenditures are up because we are building a new restaurant, and in the six-month horizon, we are projecting increased employment because of the new restaurant. We are already hearing of the danger of a substantial increase in medical premiums for our benefit renewal in January. We also expect the cost of goods to start going up, and we have some substantial increases already scheduled in September and October. Because of these expected increases, we expect to have to take a price increase in November.
  • Policies such as the Affordable Care Act and the scare of massive wage increases make it hard to have certainty. Rising interest rates are less of a concern—less than 0.3 percent of our sales are affected by a 1 percent rate rise. However, a $1 increase in minimum wages represents 4 percent of our sales and is not easily passed along.
  • We will have a new location opening in the El Paso market in early 2016.

Repair and Maintenance

  • Oil service companies seem to be pricing at break-even or at a loss. There will be business casualties within the next few months.

Truck Transportation

  • We see no signs of an economic pullback.

Pipeline Transportation

  • Overbuilding of competing midstream assets combined with a slowdown in volume growth from oil production has increased competition and pressured margins.

Merchant Wholesalers, Durable Goods

  • Our responses to this survey reflect the fact that 75 percent of our business is oil and gas related. Obviously this industry has taken a downturn. We are attempting to broaden our customer base in order to level our sales.
  • Our capital expenditures are increasing due to our efforts to improve the e-commerce portion of our business.

Merchant Wholesalers, Nondurable Goods

  • We are very concerned about what is going on in the oil market. This is beginning to have a negative effect on our business. We will just need to make necessary adjustments to adapt to the new model.

Motor Vehicle Parts Dealers

  • Crude oil prices appear to be the biggest problem.
  • We are faced with a deterioration of our manufactuarer’s position in the marketplace. This, coupled with the energy-related slowdown, is reflected in lower sales.

Building Material and Garden Equipment and Supplies Dealers

  • We are getting a lot of applications from oilfield workers now that oil is not looking good.
  • 2015 has not started out as good as 2014. Sales in the first seven months have been flat to lower. Our projections are for an increase in the last two quarters of 2015.This is based on open orders and projects that have been delayed for one reason or another. Overall, we are not happy with the current business climate.
  • We are cautiously optimistic.

Food and Beverage Stores

  • Summer sales are less than expected.

 

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
Unadjusted excel   Unadjusted excel
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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