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Texas Service Sector Outlook Survey

Report in PDF
June 30, 2015

Texas Service Sector Activity Strengthens

What's New This Month

For this month's survey, Texas business executives were asked supplemental questions on the impact of lower energy prices. 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 improved in June, according to business executives responding to the Texas Service Sector Outlook Survey. The revenue index, a key measure of state service sector conditions, advanced from 3.8 to 13.2.

Labor market indicators reflected slower employment growth and unchanged workweeks. The employment index moved down from 8.9 to 5.6 in June. The hours worked index edged down to a reading near zero this month, indicating average hours worked in June were the same as in May.

Perceptions of broader economic conditions continued to reflect some optimism in June. The general business activity index rose 3 points to 4.1. The company outlook index was unchanged at 6.7, with 18 percent of respondents reporting that their outlook improved from last month, compared with 11 percent noting that it worsened.

Price pressures increased, while wage pressures were unchanged this month. The selling prices index moved up from 3.6 to 7.9, indicating prices increased at a faster pace than in May. The wages and benefits index was similar to last month at 15.6, although the great majority of firms continued to note no change in compensation costs.

Respondents’ expectations regarding future business conditions continued to reflect optimism in June. The index of future general business activity edged up from 10.6 to 12.5. The index of future company outlook ticked down from 15 to 12.9. Indexes of future service sector activity, such as future revenue and employment, also continued to reflect optimism this month.

Texas Retail Outlook Survey

June 30, 2015 

Retail Sales Rebound

Retail Sales Rebound

Retail sales climbed in June, according to business executives responding to the Texas Retail Outlook Survey. The sales index surged back into positive territory, jumping almost 24 points to 13.1. Inventories increased at a slower pace this month.

Labor markets were mixed in June. The employment index edged back into positive territory to a reading of 1, indicating retail jobs increased slightly this month. The hours worked index remained negative, but ticked up from -5.8 to -3.8, suggesting shorter workweeks.

Retailers’ perceptions of broader economic conditions were mixed this month. The general business activity index retreated into negative territory to a reading of -5.7. The company outlook index rose 3 points to 9.4, with 22 percent of respondents noting an improved company outlook over the prior month, compared with 13 percent reporting their outlook had worsened.

Retail price pressures eased, while wage pressures increased in June. The selling prices index fell slightly from 8.3 to 6.5. The wages and benefits index edged up from 10.2 to 11.4, although the great majority of firms noted no change in labor costs.

Retailers’ perceptions of future broader economic conditions reflected less optimism in June. The index of future general business activity remained positive but fell sharply from 14.6 to 4. The index of future company outlook also fell from 23.2 to 10.5. Indexes of future retail sector activity remained in solid positive territory 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 June 16–24, and 256 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: July 28, 2015

Texas Service Sector Outlook Survey

June 30, 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 Jun
Index
May
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Revenue
13.2
3.8
+9.4
Increasing
68
30.5
52.2
17.3
Employment
5.6
8.9
-3.3
Increasing
64
13.6
78.4
8.0
Part-time employment
0.5
4.5
-4.0
Increasing
20
7.1
86.3
6.6
0.1
1.9
-1.8
Increasing
3
6.7
86.7
6.6
Wages and benefits
15.6
16.1
-0.5
Increasing
69
19.0
77.6
3.4
Input prices
21.8
18.8
+3.0
Increasing
74
24.6
72.6
2.8
Selling prices
7.9
3.6
+4.3
Increasing
55
11.4
85.1
3.5
Capital expenditures
14.5
13.0
+1.5
Increasing
70
20.4
73.7
5.9
General Business Conditions
Current (versus previous month)
Indicator Jun
Index
May
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
Company outlook
6.7
6.9
-0.2
Improving
3
18.1
70.5
11.4
General business activity
4.1
1.1
+3.0
Improving
2
18.3
67.5
14.2
Business Indicators Relating to Facilities and Products in Texas
Future (six months ahead)
Indicator Jun
Index
May
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Revenue
42.3
33.8
+8.5
Increasing
76
52.2
37.9
9.9
Employment
25.4
25.9
-0.5
Increasing
75
33.6
58.1
8.2
Part-time employment
9.8
9.2
+0.6
Increasing
36
16.3
77.2
6.5
3.1
2.8
+0.3
Increasing
19
9.0
85.1
5.9
Wages and benefits
39.6
35.2
+4.4
Increasing
102
42.4
54.8
2.8
Input prices
44.2
39.8
+4.4
Increasing
102
46.7
50.9
2.5
Selling prices
29.8
19.8
+10.0
Increasing
74
35.5
58.8
5.7
Capital expenditures
22.7
22.8
-0.1
Increasing
75
30.5
61.7
7.8
General Business Conditions
Future (six months ahead)
Indicator Jun
Index
May
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
Company outlook
12.9
15.0
-2.1
Improving
46
26.3
60.3
13.4
General business activity
12.5
10.6
+1.9
Improving
45
26.3
59.9
13.8

*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

June 30, 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 Jun
Index
May
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Retail Activity in Texas
Sales
13.1
-10.7
+23.8
Increasing
1
32.7
47.7
19.6
Employment
1.0
-0.9
+1.9
Increasing
1
10.8
79.4
9.8
Part-time employment
3.4
1.8
+1.6
Increasing
3
10.3
82.8
6.9
Hours worked
-3.8
-5.8
+2.0
Decreasing
2
6.5
83.2
10.3
Wages and benefits
11.4
10.2
+1.2
Increasing
52
15.9
79.6
4.5
Input prices
17.6
4.1
+13.5
Increasing
5
20.7
76.2
3.1
Selling prices
6.5
8.3
-1.8
Increasing
3
15.0
76.5
8.5
Capital expenditures
13.5
14.0
-0.5
Increasing
20
22.0
69.5
8.5
Inventories
7.0
12.2
-5.2
Increasing
3
26.9
53.2
19.9
Companywide Retail Activity
Sales
17.8
-4.4
+22.2
Increasing
1
36.9
44.0
19.1
Internet sales
13.5
5.2
+8.3
Increasing
25
16.9
79.7
3.4
Catalog sales
8.3
5.4
+2.9
Increasing
3
11.1
86.1
2.8
General Business Conditions, Retail
Current (versus previous month)
Indicator Jun
Index
May
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
Company outlook
9.4
6.4
+3.0
Improving
3
22.2
65.0
12.8
General business activity
-5.7
3.9
-9.6
Worsening
1
18.2
57.9
23.9
Business Indicators Relating to Facilities and Products in Texas, Retail
Future (six months ahead)
Indicator Jun
Index
May
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Retail Activity in Texas
Sales
43.5
31.1
+12.4
Increasing
76
53.1
37.3
9.6
Employment
17.6
14.1
+3.5
Increasing
4
30.0
57.6
12.4
Part-time employment
1.5
3.4
-1.9
Increasing
2
13.5
74.5
12.0
Hours worked
0.3
-1.2
+1.5
Increasing
1
8.8
82.7
8.5
Wages and benefits
27.4
24.0
+3.4
Increasing
76
31.4
64.6
4.0
Input prices
33.9
16.7
+17.2
Increasing
74
37.5
58.9
3.6
Selling prices
33.4
23.7
+9.7
Increasing
74
40.4
52.6
7.0
Capital expenditures
19.3
20.0
-0.7
Increasing
51
28.1
63.2
8.8
Inventories
16.4
16.9
-0.5
Increasing
67
32.3
51.8
15.9
Companywide Retail Activity
Sales
42.4
25.3
+17.1
Increasing
75
48.3
45.7
5.9
Internet sales
23.0
30.0
-7.0
Increasing
75
25.6
71.8
2.6
Catalog sales
10.3
9.6
+0.7
Increasing
5
11.2
87.9
0.9
General Business Conditions, Retail
Future (six months ahead)
Indicator Jun
Index
May
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
Company outlook
10.5
23.2
-12.7
Improving
75
24.5
61.5
14.0
General business activity
4.0
14.6
-10.6
Improving
3
23.9
56.2
19.9

*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

June 30, 2015

TSSOS Chart

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

 

Texas Retail Outlook Survey

June 30, 2015

TSSOS Chart

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

Texas Service Sector Outlook Survey

June 30, 2015

Comments from Survey Respondents

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

Credit Intermediation and Related Activities

  • If interest rates rise before year-end, our cost of doing business will increase and our overall revenue will decrease.
  • Brisk auto sales and a flurry of mortgage activity may reflect consumers thinking that interest rates will be increasing soon. Commercial activity is also good, indicating that investment is increasing due to economic gains.
  • We have a hiring freeze.
  • Wet weather has been a blessing but has dirupted harvest and planting. Cattle prices remain strong and herd numbers are increasing. Sheep and goat prices are at historical highs. Frack sand companies continue to cut hours and lay off employees. A local drilling rig and a workover rig reportedly sold to a buyer from Mexico, and the plant will be moved to Mexico for cheaper labor, resulting in workers being unemployed.

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

  • Selling prices are moving downward; our customers want a certain percentage reduction in prices. They will get some reduction but not as much as desired. These selling price pressures are coming at a time when costs from federal regulations and health care insurance are accelerating really fast. This is not a good picture for business. Employment and capital expenditures must decrease.

Real Estate

  • Both the commercial and residential real estate markets are up strongly through the first six months of the year despite the decrease of available single-family homes for sale. Commercial activity is robust.

Rental and Leasing Services

  • In the last two months, the Texas economy for heavy construction equipment has gone from slow to nonexistent. There is nothing moving or shaking right now, and we have 22 stores across Texas.

Professional, Scientific and Technical Services

  • The amount of orders being turned in for commercial and residential properties is still at a very high level, which indicates that this market will remain hot for the foreseeable future.
  • Business has picked up, and we hear it will be busy in fourth quarter. However, we are not hiring more people yet; our only hires are replacements for better people.
  • The apartment business continues to boom nationally and in most markets in Texas, although Houston is expected to underperform. Solid fundamentals—including occupancy and rent growth—keep capital flowing into the multifamily sector.

Management of Companies and Enterprises

  • We feel there is too much government regulation.
  • For our customers and our business, the overreach of federal government continues to stall any real improvement in the business climate. We see no hope for any real economic improvement.

Administrative and Support Services

  • We continue to see belt-tightening in the commercial sector. This is a result of increases in the cost of business for our clients and increased competition. We must increase our service offerings in order to maintain business and increase sales.
  • In our arena, the increased business is coming from contracted work we are capturing and not necessarily from a better economy.

Telecommunications

  • Recent flooding in May for the Houston area negatively impacted construction, and the continued contraction of employment in the oil and gas sector is impeding revenue growth. Also, FCC and legislative rulings are negatively impacting our decisions in hiring and materials purchasing.

Educational Services

  • In an institution of higher education, personnel fluctuate in the summer. We have fewer faculty and student employees from June through August.

Ambulatory Health Care Services

  • Our additional part-time help is summer help. We expect to see general business activity drop as oil fields continue to wind down. We also may see a decline related to lower commodity prices.
  • Pricing changes are, to a large extent, contingent upon Medicare rate changes, which generally occur on a calendar year basis. Indications of changes—which are almost always reductions—for subsequent years are generally provided in late third to early fourth quarter. Therefore, no changes are anticipated through the remainder of this year.

Nursing and Residential Care Facilities

  • We are anxiously watching the King v. Burwell case before the U.S. Supreme Court. This has the potential to disrupt the health care sector if it has the effect of overturning the Affordable Care Act. Hospitals are always subject to federal health policy changes. We are in a dynamic, uncertain environment.

Amusement, Gambling and Recreation Industries

  • Austin is an unusual place for business in the state. We are not as affected by the oil price decrease. Our current problems remain hiring people with the right skills to work at our company. With the unemployment rate so low, we will be looking at increasing wages in the near future. In addition, it has gotten almost impossible for moderate income people to live anywhere near downtown. Food prices are a challenge with the avian flu having a profound impact on the price and availability of eggs and chickens.

Food Services and Drinking Places

  • Sales at both of our concepts are very strong. Comparable sales for June were up 8.6 percent in one concept and 9.9 percent in the other. Business has been very strong all year, and so far no dropoff has been seen, even with higher prices at the pump. No new locations will be opened in the rest of 2015, but we will have several new locations in 2016.
  • Health insurance costs and new regulatory requirements are making it increasingly more difficult for small businesses to be profitable.
  • Year-over-year sales in early June have been slower than in the last few months, but they are still up by more than our 1.5 percent price increase in place. It's too soon to tell if this is going to be an extended slump or if it is just a bump in the road. We are building a new unit that will open within the six-month horizon, so capital expenditures are up now. We issued a reworked menu in late May that did include a very small price increase. We have a tentative price increase scheduled in November, which is likely to be in the 1 to 1.5 percent range if things work out as we are projecting.
  • Egg prices are having a significantly negative impact on the restaurant industry.

Merchant Wholesalers, Durable Goods

  • There is uncertainty in agriculture because of the excess moisture in all areas of state.
  • The weather was the major cause for our revenue decrease in June.
  • We think that economic conditions are bad now and will be in the future.
  • The rain in May was a killer. It impacted our sales quite a bit, but June has seen a nice bounce back. We expect these catch-up sales to be robust through August, but our economic forecast calls for a slowing growth rate through the first quarter of 2016 before more aggressive growth rates return. We are optimistic about 2016 and 2017 in both single-family and multifamily construction.
  • Weather continues to be a significant drag on revenues. Construction activity was severly impacted. Now there is mounting pressure on backlogs and delays that will impact jobs and cause further delays into 2016.

Motor Vehicle Parts Dealers

  • We think the overall level of buiness in our industry will diminish some due to the lower level of oil-related activity. We are approaching it as if we have not already reached bottom on downsizing; however, the overall level of activity in our industry is definitely down from a year ago.

Furniture and Home Furnishings Stores

  • The severe weather—rainfall and flooding in the Red River Valley—has had a dramatic effect on our business, reducing construction activity.

Building Material and Garden Equipment and Supplies Dealers

  • Business is not as good as last year but much better than the prior three years. There is still uncertainty about the overall strength of the economy.

 

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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