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Texas Service Sector Activity Expands, Retail Sales Growth Holds Steady, Says Dallas Fed Survey

For Immediate Release: January 29, 2019

DALLAS—Texas service sector activity grew at a faster pace in January, according to business executives responding to the Texas Service Sector Outlook Survey.

The revenue index, a key measure of state service sector conditions, rose from 10.1 in December to 14.9 in January. Positive readings in the survey generally indicate expansion of service sector activity, while readings below zero generally indicate contraction.

The general business activity index was largely unchanged at -4.8, indicating a deterioration in perceptions of conditions in January, while the company outlook index rebounded to positive territory at 1.3. The outlook uncertainty index fell slightly but remained high at 14.0.

“January was a solid month for Texas service sector activity as revenue growth increased and labor market indicators suggested a continued expansion,” said Christopher Slijk, Dallas Fed assistant economist. “Perceptions of broader business conditions remained soft, however, and retailers, in particular, continued to report pessimism in their outlooks.”

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

Employment growth slowed. The employment index fell almost three points to 7.0, while the hours worked index increased from 1.9 in December to 6.6 in January.

Price and wage pressures eased. The wages and benefits index dipped to 18.7 in January, while the selling price index fell nearly three points to 7.9, its lowest reading since early 2017.

Expectations of future business conditions improved slightly. The future general business activity index increased over four points to -0.6, while the future company outlook index picked up six points to 7.6.

The survey 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 that report include:

Retail sales grew at a stable pace. The sales index held roughly steady at 6.5 in January. Inventory growth picked up sharply, as the inventories index surged nearly 13 points to 19.0.

Retailers remained pessimistic about broader business conditions. The general business activity index increased nearly five points but remained negative at -12.1, with almost one-fifth of respondents reporting worsening business activity. The company outlook index increased over seven points but also remained negative at -8.3 in January.

Price pressures were mixed, while wage pressures eased. The selling prices index increased by two points to 14.7, while the input price index fell over nine points to 15.0, its lowest reading since mid-2017. The wages and benefits index fell from 11.1 in December to 8.3 in January.

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
Email: jennifer.chamberlain@dal.frb.org