Texas service sector activity continues to expand, retail sales strengthen in August, says Dallas Fed survey
For Immediate Release: August 28, 2018
DALLAS—Texas service sector activity continued to increase in August, albeit at a slower pace than last month, according to business executives responding to the Federal Reserve Bank of Dallas’ Texas Service Sector Outlook Survey (TSSOS). The revenue index, a key measure of state service sector conditions fell from 25.4 in July to 21.5 in August.
Positive readings in the survey generally indicate expansion of service sector activity, while readings below zero generally indicate contraction.
“This was another strong month for the state’s service sector, with revenue and employment continuing to grow at a strong pace,” said Christopher Slijk, Dallas Fed assistant economist. “Wage pressures increased, and a record share of services and retail firms reported rising compensation costs. Outlooks continue to be strong, although the uncertainty surrounding firms’ outlooks remains elevated.”
Here are some additional takeaways from this month’s report:
Perceptions of broader economic conditions continued to reflect optimism, despite elevated uncertainty. The general business activity index held steady at 21.5. The company outlook index rose to 16.6 and the capital expenditures index surged six points to a postrecession high of 23.4. However, the outlook uncertainty index remained near its highest reading for the year at 11.3.
Labor market indicators reflected employment growth and longer workweeks. The employment index remained largely unchanged at 11.5, and the part-time employment index rose to its highest level since mid-2014. The hours worked index rose to 11.8 in August—its highest value on record.
Respondents were more optimistic about future business conditions. The future general business activity index increased from 25.5 in July to 27.4 in August, while the future company outlook index rose over three points to 29.8.
TSSOS also includes a component called the Texas Retail Outlook Survey (TROS), which uses information from respondents in the retail and wholesale sectors only.
Key takeaways from this month’s TROS report include:
Retail sales accelerated. The sales index jumped up from 6.0 in July to 25.8 in August. Inventories continued to rise, and the inventories index held steady at 18.4.
Retail employment also picked up. The employment index rose from 3.3 in July to 9.8 in August, with the part-time employment index jumping to a postrecession high of 14.0. The hours worked index rose nearly 13 points to 13.4.
Retailers were more optimistic about broader economic conditions, but uncertainty increased. The general business activity index rose over four points to 13.7, while the company outlook index increased from 3.2 to 7.0. The outlook uncertainty index rose to 14.0, the highest value to date.
Price and wage pressures increased. The selling prices index picked up nearly eight points to 23.2. The wages and benefits index rose to a new high, surging from 21.1 in July to 37.5 in August.
This month, Texas business executives were also asked special questions about the labor market.
The survey is conducted monthly by the Dallas Fed to obtain a timely assessment of activity in the state’s service sector, which represents almost 70 percent of the state economy and employs about 8.6 million workers. Positive readings in the survey generally indicate expansion of service sector activity, while readings below zero generally indicate contraction.
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Media contact:
Jennifer Chamberlain
Federal Reserve Bank of Dallas
Phone: (214) 922-6748
E-mail: jennifer.chamberlain@dal.frb.org