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Texas Service Sector Activity Accelerates, Retail Sales Strengthen, Says Dallas Fed Survey

For Immediate Release: February 26, 2019

DALLAS—Texas service sector activity accelerated in February, 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 14.9 in January to 19.2 in February. Positive readings in the survey generally indicate expansion of service sector activity, while readings below zero generally indicate contraction. The employment index rose nearly three points to 9.7.

Perceptions of broader business conditions strengthened, and measures of uncertainty eased. The general business activity index rebounded to positive territory at 2.0, while the company outlook index rose nearly five points to 6.1. The outlook uncertainty index fell to 8.7—its lowest value since last October.

“February saw continued improvement in state service sector activity, with growth in revenues and employment increasing,” said Christopher Slijk, Dallas Fed assistant economist. “Firms’ expectations of future business conditions strengthened notably, as outlooks improved, uncertainty measures declined and perceptions of business activity were positive.”

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

Price and wage pressures were flat. The wages and benefits index held steady at 19.1, while the selling prices and input prices indexes were mostly flat at 8.0 and 20.6, respectively.

Expectations of future business conditions improved significantly. The future general business activity index surged nearly 12 points to 11.0, while the future company outlook index picked up almost 10 points to 17.4.

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 picked up. The sales index rose from 6.5 in January to 9.2 in February. Inventory growth slowed but remained robust, with the inventories index declining from 19.0 to 13.6.

Perceptions of broader business conditions remained soft. The general business activity index increased over six points but remained negative at -5.8. The company outlook index rebounded into positive territory, rising from -8.3 to 0.5.

Employment growth strengthened. The employment index rose from 0.1 in January to 6.3 in February, while the hours worked index declined to 0.6, its lowest reading since mid-2017.

Retailers were more optimistic about future business conditions. The future general business activity index spiked nearly 28 points to 7.5, while the future company outlook index jumped from -16.5 to 7.9, its highest reading since last October.

For this month’s Texas Business Outlook Surveys, respondents were also asked special questions on employment expectations and 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
Email: jennifer.chamberlain@dal.frb.org