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Texas Service Sector Outlook Survey

Report in PDF
September 30, 2014

Texas Service Sector Activity Expands Again

Texas service sector activity improved notably in September, according to business executives responding to the Texas Service Sector Outlook Survey. The revenue index, a key measure of state service sector conditions, rose from 21 to 26.9, its highest reading in more than six years.

Labor market indicators reflected slightly slower employment growth and longer workweeks. The employment index edged down from 13.2 to 11.9 in September. The hours worked index rose slightly from 4.1 to 6.9 this month.

Perceptions of broader economic conditions reflected more optimism in September. The general business activity index moved up from 22.8 to an all-time high of 27.5. The company outlook index rose from 18.3 to 21.5, with 25 percent of respondents reporting that their outlook improved from last month and 4 percent noting it worsened.

Price pressures eased while wage pressures held steady this month. The selling prices index fell slightly from 10.5 to 8, indicating prices increased at a slower pace than in August. The wages and benefits index held steady at 19.9, suggesting labor costs increased at the same pace as last month, although the great majority of firms continued to note no change in compensation costs.

Respondents’ expectations regarding future business conditions reflected more optimism in September. The index of future general business activity moved up from 31.2 to 36.3. The index of future company outlook ticked up from 33 to 34.3. Indexes of future service sector activity, such as future revenue and employment, remained in solid positive territory this month.

Texas Retail Outlook Survey

September 30, 2014 

Retail Sales Strengthen Further

Retail Sales Strengthen Further

Retail sales climbed again in September, according to business executives responding to the Texas Retail Outlook Survey. The sales index surged from 20.6 to 35.5, its highest reading in seven years. Inventories increased at a faster pace than last month.

Labor market indicators reflected slower employment growth and longer workweeks. The employment index fell from 15.7 to 10.8, indicating retail jobs increased at a slower pace than in August. The hours worked index was largely unchanged at 3.2, suggesting longer workweeks, although the great majority of firms continued to note no change.

Retailers’ perceptions of broader economic conditions reflected more optimism in September. The general business activity index moved up from 22.9 to 25.9. The company outlook index advanced from 16.8 to 26.6, with 30 percent of respondents noting an improved company outlook over the prior month, compared with 3 percent reporting their outlook had worsened.

Retail price and wage pressures increased this month. The selling prices index rose from 15 to 19.5. The wages and benefits index edged up from 19.3 to 20.8, although the great majority of firms noted no change in labor costs.

Retailers’ perceptions of future broader economic conditions reflected more optimism in September. The future general business activity index moved up from 31 to 35.7. The index of future company outlook rose 5 points to 35.7. 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 Sept. 16–24, and 227 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: October 28, 2014

Texas Service Sector Outlook Survey

September 30, 2014
 

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 Sep
Index
Aug
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Revenue
26.9
21.0
+5.9
Increasing
59
38.6
49.7
11.7
Employment
11.9
13.2
-1.3
Increasing
55
16.9
78.1
5.0
Part-time employment
7.4
10.0
-2.6
Increasing
11
10.2
87.0
2.8
6.9
4.1
+2.8
Increasing
8
11.3
84.3
4.4
Wages and benefits
19.9
20.1
-0.2
Increasing
64
21.3
77.3
1.4
Input prices
27.8
25.0
+2.8
Increasing
65
32.0
63.8
4.2
Selling prices
8.0
10.5
-2.5
Increasing
46
13.6
80.8
5.6
Capital expenditures
14.5
16.5
-2.0
Increasing
61
20.0
74.6
5.5
General Business Conditions
Current (versus previous month)
Indicator Sep
Index
Aug
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
Company outlook
21.5
18.3
+3.2
Improving
37
25.1
71.3
3.6
General business activity
27.5
22.8
+4.7
Improving
35
31.7
64.1
4.2
Business Indicators Relating to Facilities and Products in Texas
Future (six months ahead)
Indicator Sep
Index
Aug
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Revenue
53.0
56.2
-3.2
Increasing
67
59.8
33.4
6.8
Employment
36.3
35.7
+0.6
Increasing
66
39.2
57.9
2.9
Part-time employment
14.5
13.2
+1.3
Increasing
27
18.5
77.5
4.0
7.8
4.1
+3.7
Increasing
10
12.5
82.8
4.7
Wages and benefits
47.3
42.4
+4.9
Increasing
93
48.4
50.5
1.1
Input prices
50.1
46.4
+3.7
Increasing
93
53.3
43.6
3.2
Selling prices
29.8
28.4
+1.4
Increasing
65
34.9
60.0
5.1
Capital expenditures
33.0
31.8
+1.2
Increasing
66
40.0
53.0
7.0
General Business Conditions
Future (six months ahead)
Indicator Sep
Index
Aug
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
Company outlook
34.3
33.0
+1.3
Improving
37
41.7
50.9
7.4
General business activity
36.3
31.2
+5.1
Improving
36
41.5
53.3
5.2

*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 Retail Outlook Survey

September 30, 2014
 

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 Sep
Index
Aug
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Retail Activity in Texas
Sales
35.5
20.6
+14.9
Increasing
15
45.3
44.8
9.8
Employment
10.8
15.7
-4.9
Increasing
2
15.2
80.4
4.4
Part-time employment
0.0
12.9
-12.9
No Change
1
9.4
81.1
9.4
Hours worked
3.2
2.5
+0.7
Increasing
4
9.7
83.8
6.5
Wages and benefits
20.8
19.3
+1.5
Increasing
43
23.5
73.8
2.7
Input prices
17.9
20.5
-2.6
Increasing
50
27.1
63.7
9.2
Selling prices
19.5
15.0
+4.5
Increasing
26
27.0
65.5
7.5
Capital expenditures
21.0
14.3
+6.7
Increasing
11
22.8
75.4
1.8
Inventories
22.6
19.1
+3.5
Increasing
32
33.2
56.2
10.6
Companywide Retail Activity
Sales
30.4
17.8
+12.6
Increasing
40
42.4
45.6
12.0
Internet sales
5.1
21.7
-16.6
Increasing
8
12.8
79.5
7.7
Catalog sales
3.0
0.0
+3.0
Increasing
1
5.9
91.2
2.9
General Business Conditions, Retail
Current (versus previous month)
Indicator Sep
Index
Aug
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
Company outlook
26.6
16.8
+9.8
Improving
17
29.8
67.0
3.2
General business activity
25.9
22.9
+3.0
Improving
17
32.9
60.1
7.0
Business Indicators Relating to Facilities and Products in Texas, Retail
Future (six months ahead)
Indicator Sep
Index
Aug
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Retail Activity in Texas
Sales
51.8
54.1
-2.3
Increasing
67
55.7
40.4
3.9
Employment
30.4
25.5
+4.9
Increasing
57
33.1
64.2
2.7
Part-time employment
3.2
14.3
-11.1
Increasing
15
10.0
83.2
6.8
Hours worked
3.0
9.5
-6.5
Increasing
30
10.3
82.4
7.3
Wages and benefits
46.7
36.7
+10.0
Increasing
69
49.2
48.3
2.5
Input prices
40.4
35.5
+4.9
Increasing
65
46.2
48.1
5.8
Selling prices
46.1
33.8
+12.3
Increasing
65
51.9
42.3
5.8
Capital expenditures
32.0
26.2
+5.8
Increasing
42
34.0
64.0
2.0
Inventories
27.2
27.6
-0.4
Increasing
58
38.1
51.0
10.9
Companywide Retail Activity
Sales
53.4
59.8
-6.4
Increasing
66
56.0
41.4
2.6
Internet sales
23.5
31.7
-8.2
Increasing
66
23.5
76.5
0.0
Catalog sales
7.9
8.7
-0.8
Increasing
11
8.1
91.7
0.2
General Business Conditions, Retail
Future (six months ahead)
Indicator Sep
Index
Aug
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
Company outlook
35.7
30.3
+5.4
Improving
66
41.2
53.3
5.5
General business activity
35.7
31.0
+4.7
Improving
36
43.2
49.4
7.5

*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 30, 2014

TSSOS Chart

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

 

Texas Retail Outlook Survey

September 30, 2014

TSSOS Chart

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

Texas Service Sector Outlook Survey

September 30, 2014

Comments from Survey Respondents

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

Credit Intermediation and Related Activities

  • The consumer market is still doing very well, with high levels of activity in home improvement loans and new vehicles. Volumes seem to be holding steady, and it appears that activity will continue unabated for the next few months.
  • The rain has helped from an agricultural standpoint. Close to 40,000 acres of ranch land have changed hands in the last six months. Several sand plants are expanding their plants to better meet the demand from oil drilling exploration. The towns in Central and West Texas are feeling the pressure that a growing population has on city government infrastructure for water, sewer and utilities.
  • We have plans in place to open two new branches.

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

  • Lower commodity prices continue to help cattle, dairy and ethanol producers, offsetting much of the decline for farmers.
  • We are nervous about the extension of tax breaks for capital expenditures retroactive to Jan. 1, 2014. Increases in government regulation are very expensive.

Real Estate

  • The residential real estate market is good but choppy.
  • We are experiencing a lull in the upper end of our residential sales market, probably due to the upcoming election. Fundamentally, our market is sound—residential inventory has rebounded, interest rates remain low and home appreciation rates have slowed, helping maintain an acceptable affordability level in the market. Mortgage loan underwriting and Federal Housing Administration fees are still obstacles to first-time home buyers. Hopefully, lenders and regulators will adjust lending policies in the near future.

Rental and Leasing Services

  • If the tax code related to bonus depreciation is not passed retroactive to the first of the year, we will not grow our company, make capital investments or hire more people.

Professional, Scientific and Technical Services

  • The level of activity is slowing. The number of proposals for work two to four months down the road has dropped significantly in August and September.
  • The effects of the Affordable Care Act (ACA) have been minimal—our premiums went down slightly, although our employees’ annual max out of pocket essentially doubled. This was due to our provider aligning benefits and costs with the ACA. Those who have health issues have the potential to pay more.
  • We have seen a significant increase in orders and revenue since July, and all indicators point to a continuation of a hot real estate market through the end of the year. We have remained cautious about hiring additional staff until we can determine what effect the rising interest rates will have on this market.
  • We believe companies are hesitant to spend because of concerns for global security.
  • We are concerned about the lack of real underlying strength in the economy and question how long this market recovery can continue.

Management of Companies and Enterprises

  • Too much government regulation is hurting our ability to help our customers.

Administrative and Support Services

  • Competition is strong and selling prices are difficult to increase; this will not change in the near future. Companies are conservative in their spending and cost controls, which affects service sector revenue. We continue to see more business, which is a reflection of a growing market but not necessarily a vibrant market.
  • We still have no idea what the Affordable Care Act (ACA) will do to our operations. We simply do not have the margins to cover the costs associated with the ACA.
  • Our increased revenue and need for employees are generated by winning work from other providers and not necessarily from an improved economic state. In terms of outlook, competition is getting tougher and pricing tighter. Margins are difficult to maintain.
  • We have increased revenue and headcount but estimate worsening business conditions. Our increase is due to continued increases in our company’s effectiveness in the midst of declining opportunity.

Ambulatory Health Care Services

  • We expect a decrease in Medicare reimbursement unless the Sustainable Growth Rate formula is repealed.

Hospitals

  • The regulatory and compliance requirements on rural facilities continue to burden the financial requirements of hospital districts.

Nursing and Residential Care Facilities

  • Beginning in October, the next level of cuts in Medicare reimbursement takes place for hospitals—including sequestration and value-based purchasing. In Texas, the lack of access to Medicaid for the uninsured and underinsured population, combined with the greater prevalence of high deductible health plans, are market forces that continue to pressure hospitals to do more with less.

Food Services and Drinking Places

  • Cheese prices have risen 8 percent from August to September. This is the cause of the higher input prices in September. We will be opening a new location in early 2015, which will increase revenue and labor in the six-month time frame. We will most likely take a price increase in early 2015 to offset raises and higher costs related to the Affordable Care Act. Overall, same store sales growth remains strong.
  • The cost of doing business and taxes seem to be constantly rising. It is much harder today to save for the future.
  • Our sales have been steadily improving this fiscal year. Additionally, we have been up substantially more than the price increases we have in place. It has been a long time since we have consistently maintained sales increases well over the price increases. Employee counts are virtually flat for the last year, and the rate of pay increases is less than 1 percent over a year ago. We expect that we will have to start adding people or increasing hours worked per employee if we want to continue to increase sales at the current rate. We have received preliminary estimates for the cost of employee benefits for 2015—the health insurance cost is devastating. The initial renewal quote we received calls for a 39.5 percent increase, and on top of that we are going to have to cover somewhere between double and triple the number of people we covered in the past. We expect wages to continue to show modest, if any, increase. The cost of goods was up and we expect it to continue to increase in the six-month horizon, but the rate of increase is moderate—under 2 percent—for the year. We expect the health insurance increase to force us to take a large price increase toward the end of the calendar year.
  • Taxes and the cost of protein are off the chart.

Religious, Grantmaking, Civic, Professional and Similar Organizations

  • Our revenue is heavily dependent on the health of the oil and gas industry. We are concerned that falling oil prices due to the increased supply in the U.S. could lead to problems for us in the next six months.

Merchant Wholesalers, Durable Goods

  • Improved moisture conditions are favoring agricultural equipment sales.

Motor Vehicle and Parts Dealers

  • The seasonal decline in new vehicle sales from August to September is less than normal this year. We keep expecting a slowdown in new vehicle sales, but in Houston the consumer is still willing to spend on new autos and trucks.
  • We continue to be hampered by the issues our chief manufacturer is suffering. We are missing out on a strong market.

Food and Beverage Stores

  • We are seeing a lot of new retail competition.

 

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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