Skip to content

Texas Service Sector Activity Strengthens Further

Texas Service Sector Outlook Survey

Report in PDF

September 26, 2017

Texas Service Sector Activity Strengthens Further

What's New This Month

For this month’s survey, Texas business executives were asked supplemental questions on the impact from Hurricane Harvey. Results for these questions from the Texas Manufacturing Outlook Survey (TMOS), Texas Service Sector Outlook Survey (TSSOS) and Texas Retail Outlook Survey (TROS) have been released together. Read the Special Questions results.

Texas service sector growth picked up slightly in September, according to business executives responding to the Texas Service Sector Outlook Survey. The revenue index, a key measure of state service sector conditions, edged up from 14.2 in August to 15.9 in September.

Labor market indicators reflected slower employment growth and slightly longer workweeks this month. The employment index moved down a point to 3.5. The hours worked index fell from 8.3 to 2.7.

Perceptions of broader economic conditions reflected less optimism in September. The general business activity index dipped three points to 12.4. The company outlook index dropped eight points to 7.7, with 21 percent of respondents reporting that their outlook improved from last month and 14 percent noting it worsened.

Price and wage pressures were mostly unchanged this month. The selling prices index held steady at 4.7. The wages and benefits index inched up a point to 15.6, although the majority of firms continued to note no change in compensation costs.

Respondents’ expectations regarding future business conditions reflected more optimism in September. The index of future general business activity rose from 21.3 to 28.0. The index of future company outlook moved up three points to 29.4. Indexes of future service sector activity, such as future revenue and employment, continued to reflect optimism this month.

Texas Retail Outlook Survey

September 26, 2017

Retail Sales Growth Improves

Retail sales improved notably again in September, according to business executives responding to the Texas Retail Outlook Survey. The sales index surged 16 points to 32.8 in September, its highest reading in three years. Inventories increased at a slower pace this month.

Labor market measures indicated slight employment gains and longer workweeks this month. The employment index edged up to 0.9. The hours worked index fell from 11.3 to 5.1.

Retailers’ perceptions of broader economic conditions reflected more optimism in September. The general business activity index jumped from 9.7 to 19.3. The company outlook index surged 14 points to 22.8, with 31 percent of respondents reporting that their outlook improved from last month and 8 percent noting it worsened.

Retail price pressures were unchanged while wage pressures increased this month. The selling prices index was similar to last month at 18.6. The wages and benefits index moved up six points to 20.0, although the majority of firms continued to note no change in compensation costs.

Retailers’ perceptions of future broader economic conditions reflected more optimism in September. The index of future general business activity rose sharply from 11.6 to 31.2. The index of future company outlook advanced 13 points to 31.1, its highest reading this year. Indexes of future retail sector activity continued to reflect optimism this month.

The Texas Retail Outlook Survey (TROS) is a component of the TSSOS that uses information only from respondents in the retail and wholesale sectors.

Next release: October 31, 2017

Data were collected Sept. 12–20, and 298 Texas business executives responded to the survey. The Dallas Fed conducts the Texas Service Sector Outlook Survey monthly to obtain a timely assessment of the state’s service sector activity. Firms are asked whether revenue, employment, prices, general business activity and other indicators increased, decreased or remained unchanged over the previous month.

Survey responses are used to calculate an index for each indicator. Each index is calculated by subtracting the percentage of respondents reporting a decrease from the percentage reporting an increase. When the share of firms reporting an increase exceeds the share reporting a decrease, the index will be greater than zero, suggesting the indicator has increased over the prior month. If the share of firms reporting a decrease exceeds the share reporting an increase, the index will be below zero, suggesting the indicator has decreased over the prior month. An index will be zero when the number of firms reporting an increase is equal to the number of firms reporting a decrease. Data have been seasonally adjusted as necessary.

Texas Service Sector Outlook Survey

September 26, 2017

Historical data are available from January 2007 to the most current release month.

Business Indicators Relating to Facilities and Products in Texas
Current (versus previous month)
IndicatorSep IndexAug IndexChangeIndicator Direction*Trend** (Months)% Reporting Increase% Reporting
No Change
% Reporting Decrease

Revenue

15.9

14.2

+1.7

Increasing

94

34.7

46.4

18.8

Employment

3.5

4.6

–1.1

Increasing

91

12.2

79.1

8.7

Part–Time Employment

2.1

3.4

–1.3

Increasing

15

8.6

84.9

6.5

Hours Worked

2.7

8.3

–5.6

Increasing

11

9.6

83.6

6.9

Wages and Benefits

15.6

14.8

+0.8

Increasing

96

18.1

79.4

2.5

Input Prices

25.2

25.6

–0.4

Increasing

101

27.2

70.8

2.0

Selling Prices

4.7

4.7

0.0

Increasing

19

11.8

81.1

7.1

Capital Expenditures

14.8

14.7

+0.1

Increasing

97

19.9

75.1

5.1

General Business Conditions
Current (versus previous month)
IndicatorSep IndexAug IndexChangeIndicator Direction*Trend** (Months)% Reporting Improved% Reporting
No Change
% Reporting Worsened

Company Outlook

7.7

15.5

–7.8

Improving

15

21.4

64.8

13.7

General Business Activity

12.4

15.1

–2.7

Improving

13

23.4

65.6

11.0

Business Indicators Relating to Facilities and Products in Texas
Future (six months ahead)
IndicatorSep IndexAug IndexChangeIndicator Direction*Trend** (Months)% Reporting Increase% Reporting
No Change
% Reporting Decrease

Revenue

45.7

44.3

+1.4

Increasing

103

54.6

36.5

8.9

Employment

24.9

26.4

–1.5

Increasing

102

32.1

60.7

7.2

Part–Time Employment

8.7

6.4

+2.3

Increasing

63

12.6

83.5

3.9

Hours Worked

4.3

6.8

–2.5

Increasing

13

8.4

87.5

4.1

Wages and Benefits

43.7

40.4

+3.3

Increasing

129

45.1

53.5

1.4

Input Prices

47.1

42.4

+4.7

Increasing

129

48.9

49.3

1.8

Selling Prices

29.9

26.2

+3.7

Increasing

101

35.4

59.1

5.5

Capital Expenditures

29.7

22.9

+6.8

Increasing

102

36.7

56.2

7.0

General Business Conditions
Future (six months ahead)
IndicatorSep IndexAug IndexChangeIndicator Direction*Trend** (Months)% Reporting Improved% Reporting
No Change
% Reporting Worsened

Company Outlook

29.4

26.2

+3.2

Improving

19

38.2

53.0

8.8

General Business Activity

28.0

21.3

+6.7

Improving

19

34.4

59.2

6.4

Texas Retail Outlook Survey

September 26, 2017

Historical data are available from January 2007 to the most current release month.

Business Indicators Relating to Facilities and Products in Texas
Retail (versus previous month)
IndicatorSep IndexAug IndexChangeIndicator Direction*Trend** (Months)% Reporting Increase% Reporting
No Change
% Reporting Decrease
Retail Activity in Texas

Sales

32.8

16.9

+15.9

Increasing

2

49.1

34.6

16.3

Employment

0.9

–0.6

+1.5

Increasing

1

8.9

83.1

8.0

Part–Time Employment

–3.2

1.7

–4.9

Decreasing

1

11.3

74.2

14.5

Hours Worked

5.1

11.3

–6.2

Increasing

3

16.4

72.3

11.3

Wages and Benefits

20.0

13.6

+6.4

Increasing

79

23.6

72.8

3.6

Input Prices

26.4

26.6

–0.2

Increasing

20

29.9

66.6

3.5

Selling Prices

18.6

18.1

+0.5

Increasing

5

26.5

65.6

7.9

Capital Expenditures

17.8

21.7

–3.9

Increasing

14

19.4

79.0

1.6

Inventories

5.9

23.5

–17.6

Increasing

12

25.8

54.3

19.9

Companywide Retail Activity

Companywide Sales

25.6

10.7

+14.9

Increasing

2

39.5

46.7

13.9

Companywide Internet Sales

14.7

18.1

–3.4

Increasing

8

20.5

73.7

5.8

General Business Conditions, Retail
Current (versus previous month)
IndicatorSep IndexAug IndexChangeIndicator Direction*Trend** (Months)% Reporting Improved% Reporting
No Change
% Reporting Worsened

Company Outlook

22.8

8.6

+14.2

Improving

2

30.9

61.0

8.1

General Business Activity

19.3

9.7

+9.6

Improving

4

28.3

62.7

9.0

Business Indicators Relating to Facilities and Products in Texas, Retail
Future (six months ahead)
IndicatorSep IndexAug IndexChangeIndicator Direction*Trend** (Months)% Reporting Increase% Reporting
No Change
% Reporting Decrease
Retail Activity in Texas

Sales

33.7

34.4

–0.7

Increasing

103

45.9

42.0

12.2

Employment

13.0

19.1

–6.1

Increasing

4

19.9

73.2

6.9

Part–Time Employment

3.7

–2.0

+5.7

Increasing

1

9.3

85.1

5.6

Hours Worked

2.3

3.8

–1.5

Increasing

2

8.8

84.7

6.5

Wages and Benefits

32.7

30.3

+2.4

Increasing

105

33.2

66.3

0.5

Input Prices

42.6

43.9

–1.3

Increasing

101

45.9

50.8

3.3

Selling Prices

40.0

36.2

+3.8

Increasing

101

43.3

53.3

3.3

Capital Expenditures

26.2

22.8

+3.4

Increasing

12

29.5

67.2

3.3

Inventories

14.8

15.0

–0.2

Increasing

11

29.0

56.8

14.2

Companywide Retail Activity

Companywide Sales

35.0

34.9

+0.1

Increasing

102

44.6

45.8

9.6

Companywide Internet Sales

13.7

23.7

–10.0

Increasing

14

20.5

72.7

6.8

General Business Conditions, Retail
Future (six months ahead)
IndicatorSep IndexAug IndexChangeIndicator Direction*Trend** (Months)% Reporting Improved% Reporting
No Change
% Reporting Worsened

Company Outlook

31.1

17.9

+13.2

Improving

10

39.0

53.1

7.9

General Business Activity

31.2

11.6

+19.6

Improving

13

36.6

58.0

5.4

*Indicator direction refers to this month's index. If index is positive (negative), indicator is increasing (decreasing) or improving (worsening). If zero, indicator is unchanged.

**Number of months moving in current direction.

Data have been seasonally adjusted as necessary.

Texas Service Sector Outlook Survey

September 26, 2017

Downloadable chart

Texas Retail Outlook Survey

September 26, 2017

Downloadable chart

Texas Service Sector Outlook Survey

September 26, 2017

Comments from Survey Respondents

These comments are from respondents' completed surveys and have been edited for publication.

Securities, Commodity Contracts, and Other Financial Investments and Related Activities

  • Good moisture has lifted crop yields and everyone's spirits. Auto sales are soft.
  • Houston floods have a negative impact on our Houston operations for the oil and gas industry. Business was not great before and it’s somewhat worse now. We are still plagued with costs still rising—mostly from regulations, insurance and now taxes.

Credit Intermediation and Related Activities

  • Sales tax revenue is up year to date, and with current local economic activity from the World Championship Goat Cookoff, the start of dove hunting season and the infiltration of the wind generation construction crews, we should realize continued increases in sales tax for McCulloch County and the surrounding area. The Central Texas area and extending into West Texas has had steady rains up until the beginning of September, which is unusual but bodes well for going into the autumn and winter months for beef cattle and goat producers, with market reports showing steady to firm pricing.
  • Our banks and our customers have storm damage. The recovery should increase revenue.
  • My bank has been significantly impacted by Hurricane Harvey, but it's too early to adequately assess the total impact. We will know more in 90 days.

Real Estate

  • We do not yet know the extent of Hurricanes Harvey and Irma’s effects.
  • The fall season and holidays will cause sales to slow. San Antonio continues to have a stable economy.

Telecommunications

  • Houston now has two challenging issues to include oil prices and Hurricane Harvey. I believe it will take a year or more to recover from Hurricane Harvey, and we are hopeful during this time frame oil prices will exceed $60 a barrel, which will help improve the Houston economy. We are concerned that three flooding events in less than 16 months may inhibit any Fortune 1000 companies considering locating to the Houston area, and we may see some leave the area.

Professional, Scientific and Technical Services

  • We are still maintaining a focus on Washington and a number of items going on there—from tax reform, to the Federal Reserve, to rhetoric around North Korea, the latter being somewhat troubling as there is a fair amount of uncertainty around what happens here. Something negative coming out of this inflammatory rhetoric we believe could have a very negative impact on the market and likely our clients and, as a result, us. There is a lot to watch in coming months.
  • We have seen a strong uptick in orders from U.S. and overseas (Europe, Middle East and China) customers.
  • We are still cautiously optimistic that work levels will be sustained through year-end. If tax reform is enacted prior to year-end, that will be a major boost for the professional services sector.
  • 2017 has been another great year for the real estate industry, but we have noticed a decrease in residential and commercial orders over the past few months. The next few months will paint a better picture of where this market is headed, but it definitely feels like it is slowing down.
  • We feel that the latter half of 2017 is improved over the first half of the year, thus, our projection of improved revenue. We project that 2018 will be similar to the latter half of 2017, which may allow us to hire to a small extent.
  • Low oil prices are still depressing the pipeline market.
  • The hurricanes have been a disruption to normal business activity. I expect things to get back on track soon.
  • The construction side has upticked slightly; however, the number of proposals relative to future work has continued a downward slide since last November. Revenue, a relatively good indication of construction activity, is off about 12 percent from last year.
  • Hurricane Harvey has delayed several projects that were to start at the end of August. Revenues for August were essentially zero, so Hurricane Harvey did not reduce my revenue from August, but the expected increase has not materialized.

Management of Companies and Enterprises

  • We expect increased loan demand associated with repairs, construction and equipment purchases related to Hurricane Harvey recovery efforts and related contractors performing recovery services.

Administrative and Support Services

  • The corporate aviation sector inspections continue to increase with major-type inspections coming due and not being delayed or deferred. This sector would be our largest increase in service calls since last quarter. The commercial aviation sector inspections continue to be relatively flat for revenue. With the newer aircraft frames coming into the inventory of operators, the first structural inspections due are being scheduled out further in time. The oil and gas sector inspections continue to be relatively flat—some minor maintenance-type replacement of parts and components are the main items being inspected at this time. The industrial sector inspections for newly machined parts for industrial assemblies has increased 20 percent since last quarter. We expect this market to increase as more requests for quotes are being generated as of the last quarter, and our capture rate for these has increased. Our biggest issue is regulatory issues with quality systems and the manpower that they require as they are nonproductive for revenue. The oversight cost has increased dramatically, and we have had to increase our selling prices to compensate for these costs.
  • Some of the slowdown is a result of the hurricanes as our Houston office is shut down right now and we don't see the recovery happening quickly.

Ambulatory Health Care Services

  • I estimate approximately 50 percent loss of revenue for the month of September due to Hurricane Harvey. We paid all of our employees full wages so we will experience a significant loss for the month. Fortunately, we have the financial strength to weather this economic blow.
  • Hurricane Harvey impacted all four of the counties in our catchment area and has caused a significant decrease in our revenue and productivity. We expect to rebound by November 2017.
  • Hurricane Harvey will have an impact on revenues in September; however, we still anticipate growth over the next six months. The number of employees will continue to increase related to our new division launch. Average workweeks should decrease as we get past the hurdles of a new division launch. Wages continue to increase due to low unemployment in DFW. Capital expenditures will increase at the start of the new year/budget cycle. The impact of the hurricane worsened the outlook for the near future.
  • An increase in benefit costs (health coverage) is expected for 2018 at around 6 percent.

Nursing and Residential Care Facilities

  • Labor shortages are driving overtime costs up. It is very difficult to find qualified employees.

Amusement, Gambling and Recreation Industries

  • We are looking at increases in costs that are hard to gauge and are out of our control. Our health care premiums were quoted as a 21 percent increase. The building we are in sold for what we thought was a whopping $550 per square foot. We were ready for a large increase in property taxes; that was before the building across the street just sold for $663 per square foot. That will reset the property taxes even higher. Property insurance is most assuredly going to rise to help cover the costs of the hurricanes, and the Texas Workforce Commission will need to increase its taxes to us to help cover the costs of all the people out of work from the hurricane. The parking and transportation issues are atrocious in Austin, with the city currently planning to reduce traffic lanes and add bike lanes as well as bus lanes. More of my time is dedicated to these types of issues rather than focusing on managing our business.

Accommodation

  • Houston is our largest feeder market for our hotel. This is in direct relationship to Hurricane Harvey: We are definitely feeling the effects in the short term.
  • Houston is the No. 1 feeder market for hotel stays, and the Gulf Coast is also a significant source of business. The impact of Hurricane Harvey, combined with the already weakened oil and gas sector, has resulted in trip and meeting cancellations and is reducing our future booking pace through the fall months.

Food Services and Drinking Places

  • We have continuing problems with hiring and keeping cooks and dishwashers.
  • The volume of business is falling off by about 5 percent (for the first time in at least five to six years). Sales are falling at the same rate. Traffic count is down.
  • We did have five stores in Corpus Christi, Victoria and Houston that sustained some damage from the hurricane. We will have some additional capital expenditures for those sites, but were back up and running in less than a week at all locations. Sales have been strong post-reopening. We will be adding a new location in 2018—thus higher capital expenditures. We are planning normal raises and a small price increase to cover in January 2018. Overall, business remains strong.
  • Hurricane damage and recovery will create strong economic changes.
  • We are running flat. We are up but by less than the price increases we have taken (1 percent). That trend did not change when school started. Wages and benefits will be up in the new year because we have already received a preliminary notice of a very major price increase for health care—more than 10 percent. We are in the process of implementing a price increase effective today, the beginning of our new fiscal period, which is estimated to net 1.33 percent. So, no impact in the current portion of this response, but an immediate impact in the forward-looking portion of this response.
  • The Federal Reserve continues to report no increase in wages despite lower unemployment. This is an inaccurate statement in the service industry. We are starting high school kids at $12 an hour to staff our stores with good employees. A year ago, that number was $10 an hour.

Personal and Laundry Services

  • Two new locations will be opening in the next three weeks. As a result of the new locations, we are hiring more employees. Every five years, we are having to increase prices just to keep up with inflation. Prices for our services will be increasing in October by almost 17 percent. The last price increase was in August 2012, and our next price increase, if needed, will not occur again until the year 2022 or later. There has been a significant increase in competition over the last three years and as a result, employee wages have been increasing substantially in order to attract and retain good employees. Our three largest expenditures for business operations in order are labor, rent and products. Over the last 12 months, these business expenses have increased by 12 percent, 8 percent and 18 percent, respectively.

Religious, Grantmaking, Civic, Professional and Similar Organizations

  • Damage to our physical plant from Hurricane Harvey has affected our operations in that some of our campuses are closed for repairs.
  • We have been heavily affected by Hurricanes Harvey and Irma.

Support Activities for Transportation

  • At this time, it is hard to judge the intermediate term (next three to six months) impact of Hurricane Harvey on our business activity.

Utilities

  • The initial impact from Hurricane Harvey is going to be negative as demand has declined. The longer-term impact, however, is expected to be positive as construction ramps up and previously vacant apartments and homes are rented. This should ultimately be positive for the Houston economy as federal funds flow through the economy.

Merchant Wholesalers, Durable Goods

  • A segment of our customer base responds to disasters. With Hurricanes Harvey and Irma, there will be a significant amount of work for at least the next three to six months. These disasters could add 20 percent to our revenue. Due to these disasters, we hire temporary and/or part-time workers, also the average workweek increases for our existing staff. We are about to launch a new e-commerce site and expect to see sales growth from this endeavor.

Merchant Wholesalers, Nondurable Goods

  • Hurricane Harvey put a huge dent in sales the end of August and early September. I am keeping an eye on receivables as we move through the recovery. We hope to have things back on track in the next few months.
  • Hurricane Harvey had a very severe impact on revenue. Back-to-school sales are down and recovery is very slow. The outlook for the remainder of the year remains questionable.

Motor Vehicle and Parts Dealers

  • Being in the auto and truck sales business in Houston, we are currently an outlier. Because of several hundred thousand flooded vehicles needing to be replaced, our sales are incredibly strong.
  • Weather news seems to have the consumer distracted.
  • Although general business/economic characteristics have not dramatically changed, there will be improved results in our area (Central Texas) due to the increased demand created by the damage caused by Hurricane Harvey. I expect improved results as a result of this extraordinary situation to last approximately six months.

Clothing and Clothing Accessories Stores

  • The reason for the decreases in sales, employees and general level of business activity in Texas is the impact from Hurricane Harvey.

Historical Data

Historical data can be downloaded dating back to January 2007.

Indexes

Download indexes for all indicators. For the definitions of all variables, see Data Definitions.

Texas Service Sector Outlook Survey
Texas Retail Outlook Survey
Unadjusted Unadjusted
Seasonally adjusted Seasonally adjusted

All Data

Download indexes and components of the indexes (percentage of respondents reporting increase, decrease, or no change). For the definitions of all variables, see Data Definitions.

Texas Service Sector Outlook Survey
Texas Retail Outlook Survey
Unadjusted Unadjusted
Seasonally adjusted Seasonally adjusted

Questions regarding the Texas Service Sector Outlook Survey can be addressed to Amy Jordan at amy.jordan@dal.frb.org.

Sign up for our free email alert to be automatically notified as soon as the latest Texas Service Sector Outlook Survey is released on the web.