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Texas Service Sector Activity, Retail Sales Grow at Slower Pace in October, Says Dallas Fed Survey

For Immediate Release: October 30, 2018

DALLAS—Texas service sector activity continued to grow in October but 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 26.9 in September to 19.4 in October.

The October report also includes results to special questions on credit and borrowing conditions.

Positive readings in the survey generally indicate expansion of service sector activity, while readings below zero generally indicate contraction.

“The Texas service sector expanded at a slower pace in October,” said Christopher Slijk, Dallas Fed assistant economist. “Wage pressures continued to be elevated this month, while business outlooks remained positive but were less optimistic than in September.”
Here are some additional takeaways from this month’s report:

Perceptions of broader economic conditions reflected less optimism. The general business activity index plunged from 25.6 to 14.1, while the company outlook index declined 10 points to 11.2. Nevertheless, the outlook uncertainty index dipped slightly from 9.0 in September to 8.0 in October.

Price and wage pressures remained elevated. The wages and benefits index inched down to 20.2 in October. The selling price index was largely unchanged at 16.1.

Labor market indicators reflected employment growth and longer workweeks. The employment index was mostly unchanged at 13.1, while the hours worked index also held steady at 6.2.

Respondents were less optimistic about future business conditions. The future general business activity index fell seven points to 20.9, its lowest value in over a year, while the future company outlook index fell over five points to 22.8.

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 grew at a slower pace. The sales index declined from 24.2 in September to 14.8 in October. Growth in inventories slowed significantly, with the inventories index plummeting over 16 points to 6.0.

Retail employment growth slowed. The employment index declined sharply but remained positive at 5.6. The hours worked index was largely unchanged at 4.4.

Retailers were less optimistic about broader economic conditions. The general business activity index plummeted from 21.2 to -1.1, while the company outlook index declined nearly 20 points to 2.8.

Retail price pressures eased but wage pressures increased. The selling prices index declined nearly 10 points but remained elevated at 19.7. The wages and benefits index increased from 15.0 to 17.5.

Retailers’ perceptions of future economic conditions softened considerably. The index of future general business activity fell 14 points to 6.8, its lowest reading in over a year. The future company outlook index declined nine points to 13.6.

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