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Texas Service Sector Activity Expands at a Faster Pace, Retail Sales Growth Decelerates in November, Says Dallas Fed Survey

For Immediate Release: November 27, 2018

DALLAS—Texas service sector activity grew at a faster pace in November, according to business executives responding to the Federal Reserve Bank of Dallas’ Texas Service Sector Outlook Survey. The revenue index, a key measure of state service sector conditions, rose two points to 21.4 in November.

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

Perceptions of broader economic conditions reflected continued optimism but growing uncertainty. The general business activity index declined from 14.1 in October to 11.4 in November. The outlook uncertainty index rose nearly five points to 12.8 in November, its highest reading since the index began in January 2018.

“The Texas service sector continued to grow at a strong pace in November, but we’ve seen a rise in measures of uncertainty and a moderation in firms’ outlooks for future activity, particularly in retail,” said Christopher Slijk, Dallas Fed assistant economist. “Wage pressures remained elevated, and nearly a quarter of our survey respondents noted an increase in compensation costs compared to October.”

Here are some additional takeaways from this month’s report:

Employment growth was positive but slower. The employment index fell from 13.1 in October to 8.7 in November, while the hours worked index rose slightly from 6.2 to 7.5.

Price pressures eased slightly, while wage pressures remained elevated. The wages and benefits index was roughly unchanged at 20.9. The selling price index declined nearly four points to 12.2, its lowest reading in 2018.

Respondents were less optimistic about future business conditions. The future general business activity index fell to a two-year low of 16.6, while the future company outlook index declined from 22.8 in October to 17.3 in November.

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 growth moderated. The sales index declined from 14.8 in October to 13.0 in November. The inventories index ticked down to a six-month low of 3.6.

Retail employment growth also slowed. The employment index ticked down nearly three points to 2.9 in November, a 10-month low. The hours worked index increased from 4.4 in October to 6.1 in November.

Retailers were slightly more optimistic about broader economic conditions. The general business activity index turned positive, rising over eight points to 7.5, while the company outlook index increased from 2.8 in October to 4.1 in November.

Retail price pressures eased, but wage pressures increased. The selling prices index declined seven points to 12.7, its lowest reading since July 2017. The wages and benefits index increased from 17.5 in October to 19.7 in November.

For this month’s Texas Business Outlook Surveys, respondents were also asked special questions on labor market conditions.

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.


Media contact:
Jennifer Chamberlain
Federal Reserve Bank of Dallas
Phone: (214) 922-6748