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Texas Service Sector Activity Decelerates, Retail Sales Flatten in March, Says Dallas Fed Survey

For Immediate Release: March 26, 2019

DALLAS—Texas service sector activity growth softened in March, according to business executives responding to the Texas Service Sector Outlook Survey.

The revenue index, a key measure of state service sector conditions, fell from 19.2 in February to 12.8 in March. Positive readings in the survey generally indicate expansion of service sector activity, while readings below zero generally indicate contraction. The employment index inched up slightly to 10.9.

“The state’s service sector decelerated in March, as revenue growth slowed and labor market indicators picked up modestly,” said Christopher Slijk, Dallas Fed assistant economist.

Perceptions of broader business conditions weakened. The general business activity index slipped into negative territory at ‑4.4. The company outlook index declined over seven points to ‑1.2, while the outlook uncertainty index ticked up to 11.6.

“Firms were much less optimistic this month, as perceptions of business conditions turned slightly negative, while measures of uncertainty increased,” Slijk said.

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

Price and wage pressures picked up slightly. The wages and benefits index increased from 19.1 to 22.0, while the selling prices index rose over three points to 11.2, and the input prices index picked up from 20.6 to 25.1—its highest value so far this year.

Respondents remained optimistic about future business conditions. The future general business activity index remained positive but slipped from 11.0 to 7.6 in March, while the future company outlook index was unchanged at 17.3. Other indexes of future service sector activity, such as revenue and employment, strengthened and pointed to expectations of further growth over the next six months.

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 were largely flat. The sales index fell from 9.2 in February to -0.6 in March. Inventory growth picked up, with the inventories index rising from 13.6 to 16.0.

Perceptions of broader business conditions worsened. The general business activity index fell nearly 13 points to -18.5, its lowest value since early 2016. The company outlook index declined into negative territory, falling from 0.5 to -8.5.

Labor market indicators weakened. The employment index fell from 6.3 in February to -1.0 in March, while the hours worked index fell slightly to -0.8.

Retailers were less optimistic about future business conditions. The future general business activity index fell from 7.5 to -1.6, while the future company outlook index declined about five points to 3.3. Other indexes of future retail sector activity, such as sales and employment, rose notably and reflected optimism over the next six months.

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