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.

• We think the positive changes at our company are more the result of management's effort and less that of the economy. Interest rates are high, and large banks have significantly tightened their lending criteria.
• Currently our major supplier is getting acquired, creating future uncertainty.
• Our engineering company is forecasted to have a recession year in 2024 with a reduction in revenue of about 5 percent.
• We still have concerns about the U.S. economy going into recession in 2024.
• Our company is doing well as we supply core infrastructure software, but the economy is bad in the U.S. and overseas.
• Company leaders come to our recruiting firm when they need to hire people. Even though December and January sales were down, the demand for filling positions continues at the same rate. Therefore, we are optimistic about the next six months as unemployment remains low and jobs continue to be added.
• As the new year has started, we have seen a lot more uncertainty with our private sector clients. It seems like private construction projects are taking longer to move from the proposal phase to the design phase.  Owners are taking longer to make decisions. We are still writing proposals and seeing new projects discussed, but they are not moving forward as quickly. We have also seen a slight increase in our time to get paid on our accounts receivable. That usually indicates our clients are becoming more cash conscious and worried about the future. Luckily, we are seeing a small increase in activity from our governmental clients. It seems like local municipalities, K-12 schools and higher education institutions still have access to capital. For the next few months, we are going to be relying on our governmental clients to maintain our backlog.
• We are projecting flat growth or a slight decline in 2024. We are worried that our third and fourth quarters will be much slower if the election gets contentious. There is already a lot of uncertainty in the market.  We really hope that the election does not compound that problem. We are hiring, even though we are expecting a decline in demand, because we are understaffed. We need one more engineer to be able to produce the work we currently have under contract.

• We believe that the economy is on the right track.

• The upcoming elections are weighing heavily on everyone's mind.

• Uncertainty about business, the economy, geopolitics and the leadership of America is as bad as it has been for a decade.

• Clients and prospects continue to cut costs everywhere possible and must justify any new purchases, which slows down the sales cycle. Higher interest rates are significantly affecting financial services, especially on lending volume, and we are working to reduce expenses and risk.

• It’s a very stable business environment at the moment. Employees received a cost-of-living adjustment increase in wages in January, so they will be higher paid in 2024 than in 2023.

• As a financial services company, we are greatly impacted by economic conditions and market valuations.  Our first quarter 2024 revenue will spike due to higher advisory fees from a strong equity and fixed income market in the fourth quarter of 2023. If markets continue to increase, our revenue will spike as well. Our major cost increase is wages and benefits; other services are relatively flat.

• Higher interest rates are putting pressure on more expensive homes, and inventories are increasing in all sectors.
• We are actively selling assets to reduce debt and transition to another commercial property sector such as self-storage.
• We expect fed funds rates will drop this year resulting in more commercial real estate transaction volume.
• We are expecting to upgrade our technology, thus requiring a serious investment. Though we hired someone recently, we continue to search for one or two new employees.
• Given current occupancy rates in workforce apartments in the Houston and inflation challenges for renters, there is significant pressure for us to lower rents. However, debt service, insurance and property tax costs make this virtually impossible. At best, we are no longer raising rents. Given that rent makes up a third of inflation, we are anxious for inflation metrics to reflect this. With apartment values down 25 percent to 30 percent, massive amounts of equity have been wiped out. Unfortunately, many investors have not yet realized this, have yet to be told or have their heads buried in the sand. It's going to be ugly for many retirees who have been lured into syndication deals to stretch their savings. Lenders don't even want to talk about it. (We keep trying to tell them that just because payments are in the mail does not mean the underlying asset is performing). On the other hand, great deals are coming for professional buyers who are champing at the bit to jump in. Until people get real, few properties will trade, the market will remain stuck and renters will be increasingly underserved. All of this was confirmed by industry leaders we talked to this morning at an annual breakfast.

• The continued increase in regulations is having a negative impact on small business and consumers.

• We feel bullish for 2024, but election years are always strange.

• At the first of the year, it is too soon to come to any significant conclusions regarding the direction of our business. Additionally, the arctic weather does not help. In general, our outlook is positive for 2024 and we have seen nothing at this time to change that perspective.

• We see lower 10-year Treasury rates and slowing CPI, moderating wage pressure and a more balanced employment picture.
• The political environment in Washington is causing major concerns for the future.
• We have had a few clients pause jobs we had been working on filling for two months. Very disappointing and frustrating when you have found talented professionals the client planned to make offers to, and at the last minute, they regroup and pause their hiring plans. We actually had one client make verbal offers and then two weeks later rescind the offers. We've also had publicly traded client companies that have not made payment on professionals they hired until 90 days. Holding onto their cash while causing us, a small business, cash flow challenges in an uncertain economy has certainly been rough.

• We don’t think as a country we truly comprehend the challenges that are before us over the six to 12 months ahead and the election. The inflationary pressures are not only driven by deficit spending, but also the increasing shrinkage that’s occurring in retail is affecting the prices we are paying.

• There is uncertainty about electric vehicles as we approach a possible change in the president, and we deal with numerous issues surrounding these vehicles.
• Expenses continue to increase and margins to decline. Inventory levels are high and cost to carry at today’s interest rates is negatively impacting profitability. Competitive landscape has eroded the pre-owned market, and this is major problem. Selling gross declined 30 percent in 2023.

• We have noticed a slight decrease in business activity. Hiring truck drivers remains a serious problem.

• We expect a pickup in sales over 2023, but still a number of unknowns could change our estimate.

• Most vendors are predicting a small negative-to-flat outlook over the next two quarters.

• The overall outlook is very dim for 2024. We don't even know if we'll be able to survive.

• Our fourth quarter of 2023 was very slow. Our sales declined 20 percent for the year, but we did not lose any customers. They simply ordered less than is typical for fourth quarter  Since then, the Fed has indicated they will pause or even lower interest rates this year. Even if the rate cuts come later, we believe consumers will have the confidence to spend money, if they believe rates won't continue to rise. Therefore, we have a positive outlook on 2024 restaurant spending, and we are hopeful the spending will return to normal levels.

• The local business climate continues to be robust due to our strong energy sector. After years of holding prices the same since 2021 while our costs continued to rise, it was time to raise prices and regain margins. Our customers accepted the increases as customer counts continue to rise along with sales and profits. The employment environment has improved with fewer no-shows, fewer requests for time off and better applicants to interview.
• January is a slower month; we’ll get through it and hope the trends turn, especially once the tax return season begins.