Texas Service Sector Outlook Survey

Historical data are available from January 2007 to the most current release month.

Historical data are available from January 2007 to the most current release month.

*Shown is the number of consecutive months of expansion or contraction in the underlying indicator. Expansion is indicated by a positive index reading and denoted by a (+) in the table. Contraction is indicated by a negative index reading and denoted by a (–) in the table.

**Shown is the number of consecutive months of improvement or worsening in the underlying indicator. Improvement is indicated by a positive index reading and denoted by a (+) in the table. Worsening is indicated by a negative index reading and denoted by a (–) in the table.

Data have been seasonally adjusted as necessary.

Texas Service Sector Outlook Survey

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Texas Retail Outlook Survey

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Texas Service Sector Outlook Survey

Comments from survey respondents

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

• I feel that the economy is getting back on track.

• United Auto Workers strike has affected us since the Ford Kentucky truck plant went on strike. This is a bit of a breather because we have not been able to find operator-level talent for months now.
• Overall activity is still stagnant due to overall economic conditions, uncertainty and interest rates.
• We anticipate significant growth due to the start of liquid natural gas projects and infrastructure projects. Additionally, we anticipate two small acquisitions in this period. Both will increase revenue and overall head count.
• Financial challenges remain. Access to capital will continue to limit growth in some sectors. Cash management has taken on a whole new meaning.
• The lack of qualified workers still presents a huge impediment to growth and business sustainability. This is especially difficult for small businesses. Small business owners are exhausted and are tempted to close shop.
• The economy seems to be steeply going down in the US and major global regions we serve, Europe, China and Asia.
• Our backlog for the fourth quarter of 2023 is strong. We have a considerable amount of work planned through the end of the year. However, our projections for the first quarter of next year are lower than expected by 15 percent. Our new orders have dropped dramatically. We have no current plans to hire any replacements to fill vacancies caused by turnover but no plans to have forced layoffs either.
• Real estate and other transactional areas still slow.
• We have added some artificial intelligence capabilities to our timesheet software that we think may excite our clients and generate market for us.
• For our engineering services, 2024 is projected to be a recession year.
• The general level of activity in the real estate market continues to slow while the 10-year rate continues to climb. Higher interest rates have stifled this market, and we are afraid the worst is yet to come. Refinancing existing debt will be challenging due to the 500-600-basis-point increase in rates and the fact that regional banks are not lending. Most owners will not have the additional equity required to refinance their debt. On the purchase and sale side of the market, we still have a re-pricing issue that needs to be resolved between sellers and buyers before assets can trade. We are all trying to find something positive in this marketplace, but it is just not there. This is looking more and more like a train wreck instead of a soft landing.

• Interest rate hikes have slowed loan demand. Applicants for loans are having to reduce project size and loan amounts due to higher interest rates not allowing them to qualify. New project financing for both consumer and commercial borrowers have significantly decreased.

• The corporate aviation market has increased the most since the last reporting.
• The commercial real estate market really seems frozen in some ways. Financing is hard and deals don't pencil at these rates.
• We have seen our restaurant business suffer as some of our long-term customers have shut down facilities.
• Geopolitical concerns abroad and in Washington are creating an uncertain environment.
• Fewer jobs coming from clients, and they are taking longer to make decisions about whom to hire, and they are slower to pay after hiring. We are trying not to lay off and will be cutting salaries beginning in 2024 to try to retain staff without layoffs.

• The uncertainty today is different than before but still high and not likely to change for the foreseeable future.
• It feels like people are settling into a period of high uncertainty and continued, though moderating, inflation. Some potential clients are staying on the sidelines until conditions improve.
• We remain concerned that fiscal policy is not working in harmony with monetary policy to bring down inflation. We are also concerned that recent geopolitical events will affect markets in the short-term and long-term.

• Tensions in the Middle East and worries about the broader economy seem to be impacting travel and lodging as people reduce their spending in these areas.
• Business seems to be in line with expectations, not great but nor terrible either. We seem to be receiving more lead volume for group business, which will translate to actual bookings for 2024, and the year may turn out to be a pleasant surprise.

• We are seeing an abnormal decrease in overall business activity that started in September and has continued into October.

• We have received a grant which will be used to renovate a cargo-based area. We are in negotiations to convert a terminal previously used for fruit imports into a cruise terminal. The conversion will increase revenue by the end of 2025. But there is uncertainty due to restricted credit.

• We have sold the company to a Fortune 50 and expect to close in November. The new company will provide a significant uplift.

• The downstream effects of overspending and the ripple effect to interest rates and inflation are having a negative impact on business. Decisions from prospects for new purchases are delayed, and current customers' budgets are under intense scrutiny to continue purchases.
• We see an improvement in our sales volume starting in late summer. More companies seem to either have budget left to spend this year, or they have more confidence than in the first half of the year. That said, we still hear many stories of companies trying to find footing in this economy.

• We are seeing a slight increase in our activity because commercial real estate borrowers are leaving banks to seek alternatives to their existing mortgage debt, both willingly and unwillingly.
• The geopolitical climate has increased uncertainty for the economy. Liquidity continues to be challenging. Interest expense is the single major expense facing lenders and borrowers.

• The economy still feels stable, despite the Federal Reserve trying to slow the economy.  We are planning to offer cost-of-living adjustment increases to our employees on January 1, so we will be paying higher wages in 2024 than we are currently. We will not increase our pricing to our customers for the first time in a decade, but we expect higher revenue from continued higher crude export volumes.

• As a financial services company, we are impacted by economic and market conditions. With the current high interest rate environment and economic conditions, we are concerned about a slowdown early next year.
• Rapid increases in interest rates have frozen debt markets, meaning we cannot refinance properties. We are feeling the pain.

• You cannot raise prices for three years by 30 percent and then increase interest rates and not expect to kill the market for construction equipment sales. It is progressively slowing down the market. Manufacturers will subsidize interest rates on new equipment sales through end of the year, but early next year they will stop cold, and the market will stop on a dime!

• Something must give. Interest rates, a tightening of capital access, increasing geopolitical turmoil and more all add up to problematic conditions.

• Claims and rate adequacy are going to affect affordability of policies for both residential and commercial property owners. We expect rate increases and the lack of competitive markets to last through 2024 at a minimum.

• We are seeing little change, but with world wars, interest rate uncertainty and the reality of high renewal rates kicking in, we do see some slowing coming. However, with the strength of business and the job market, we do not think the slowdown will be significant. We continue to see good strength in our retail markets.
• No change in the outlook for the depressed commercial real estate market until interest rates begin to drop and trigger greater transaction activity.
• Inflation and interest rates have been tough.
• Our phone is ringing - mostly apartment owners who are in trouble and need help. Also, deal makers looking to capitalize on newly reset property values. Higher interest rates and insurance costs are killing off over-leveraged deals. Once the lenders and investors involved in these have taken their licks, the multifamily market will head back up again.

• People are nervous and not spending money, like in early spring. They are making choices, and we can see them holding back.

• We have been able to enjoy better competition with regulations against pharmacy benefit managers. With oligopolistic organizations losing sympathy and power from the public and regulating agencies, smaller independent pharmacies can have fair competition and provide better pricing for patients. Getting adequate credit and financing is a tad tougher due to inflation and interest rate hikes but not impossible. Having a strong relationship with a bank and showing consistency helps, as in any business or even personal relationship.

• The Federal Reserve may not realize it yet, but they have succeeded in diminishing the economic prospects of our business and many others. Stop raising rates, it has worked.
• So many things are happening in the world, nevertheless our industry that makes it hard to plan. We are more reactive than proactive currently. Take it day to day, week to week, month to month. Election years are not good for the construction industry, and interest rates are killing us.

• People are stuck where they are, not buying cars, houses, appliances, etc.

• New and used car affordability has taken a big hit. Between higher car prices and higher interest rates, a new car is out of reach for more people every month.

• Headwinds are mounting. Interest expense due to floating rate credit, continuing increases in both labor and input costs, unsustainable construction costs and a softening economy are finally going to bring growth to a halt and likely result in a step back in GDP.
• We are starting to see meaningful decreases in consumer spending.
• Soft occupancy in downtown office buildings and reduced business travel in downtown continue to be significant negatives. Increasing input costs of goods sold, general expenses and labor costs do not seem to be softening as we had previously anticipated.
• High energy prices increase oil field activity that have a direct effect in our sales. Employee retention has improved because we are seeing more applicants to pick from.
• We are hearing more businesses are having problems.

• Overall, sales are down. In discussions with suppliers, they are seeing similar decreases in other markets as well. The consensus is that stimulus money is not being spent, and people are adjusting their spending according to their income. September is historically a slow month for restaurant sales as families send kids back to school. It's hard to separate the seasonality from overall decline, but October is lower than historical trends, so we would say the decline started during the summer.
• Interest rate hikes, strikes and labor shortages, in addition to increased property values and associated taxes, continue to have detrimental effects on the business environment.

• Much of our recent growth has been a result of taking market share.