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Texas Service Sector Activity Decelerates, Retail Sales Fall in May, Says Dallas Fed Survey

For Immediate Release: May 29, 2019

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

The revenue index, a key measure of state service sector conditions, dropped from 13.9 in April to 2.7 in May. Positive readings in the survey generally indicate expansion of service sector activity, while readings below zero generally indicate contraction. The employment index declined nearly five points but held positive at 6.8.

“Texas service sector activity decelerated in May, as revenue growth slowed and labor market indicators softened,” said Christopher Slijk, Dallas Fed assistant economist. “Overall perceptions of current business conditions were weaker than last month, and measures of uncertainty increased. Retailers in particular were pessimistic in their outlooks for future activity.”

Key takeaways from the report include:

Perceptions of broader business conditions turned negative. The general business activity index fell six points to -0.3, while the company outlook index fell into negative territory at -2.3. The outlook uncertainty index surged from 12.8 to 19.3 in May.

Price and wage pressures eased moderately. The wages and benefits index fell to 19.0 in May, while the selling prices index fell to 4.6. The input prices index slipped two points to 23.7.

For this month’s survey, Texas business executives responded to supplemental questions on the labor market, wages and prices.

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 declined. The sales index plummeted from 13.2 in April to -9.2 in May, its lowest value since 2015.  

Labor market indicators were negative. The employment index fell over 12 points to -3.8, while the hours worked index declined to -7.8, its lowest reading since late 2016.

Retailers were pessimistic about broader business conditions. The general business activity index fell from -10.7 to -15.5, while the company outlook index plummeted over 15 points to -20.4, a near-decade low. The outlook uncertainty index surged to a record high of 34.6.

Retailers’ perceptions of future business conditions also worsened. The future general business activity index fell from 2.5 in April to -15.6 in May, while the future company outlook index fell over 17 points to -8.4. Other indexes of future retail sector activity, such as sales and employment, also turned negative.

The Dallas Fed conducts the survey monthly 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.

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Media contact:
Jennifer Chamberlain
Federal Reserve Bank of Dallas
Phone: (214) 922-6748
Email: jennifer.chamberlain@dal.frb.org