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Texas Service Sector Activity Picks Up

Texas Service Sector Outlook Survey

Report in PDF

October 31, 2017

Texas Service Sector Activity Picks Up

What's New This Month

For this month’s survey, Texas business executives were asked supplemental questions on credit availability. 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 activity increased again in October, 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 15.9 in September to 19.2 in October, its highest reading this year.

Labor market indicators reflected faster employment growth and longer workweeks this month. The employment index moved up from 3.5 to 8.3. The hours worked index rose five points to 7.8.

Perceptions of broader economic conditions reflected more optimism in October. The general business activity index advanced six points to 18.6. The company outlook index rose from 7.7 to 16.4, with 22 percent of respondents reporting that their outlook improved from last month and 5 percent noting it worsened.

Price and wage pressures increased this month. The selling prices index moved up from 4.7 to 10.2. The wages and benefits index edged up a point to 16.9, although the majority of firms continued to note no change in compensation costs.

Respondents’ expectations regarding future business conditions reflected more optimism in October. The index of future general business activity rose slightly from 28.0 to 30.5. The index of future company outlook moved up three points to 32.4. Indexes of future service sector activity, such as future revenue and employment, reflected more optimism this month.

Texas Retail Outlook Survey

October 31, 2017

Retail Sales Growth Slows, but Remains Solid

Retail sales continued to expand in October, albeit at a slower pace than last month, according to business executives responding to the Texas Retail Outlook Survey. The sales index remained positive but fell 15 points to 17.7 in October. Inventories increased at the same pace as last month.

Labor market measures indicated faster employment growth and longer workweeks this month. The employment index rose seven points to 8.0, suggesting retailers added jobs on net. The hours worked index edged up from 5.1 to 7.5.

Retailers’ perceptions of broader economic conditions continued to reflect optimism in October. The general business activity index rose slightly from 19.3 to 22.0. The company outlook index edged down three points to 19.6, with 23 percent of respondents reporting that their outlook improved from last month and 3 percent noting it worsened.

Retail price pressures increased while wage pressures eased this month. The selling prices index rose five points to 23.8. The wages and benefits index fell slightly from 20.0 to 18.5, although the majority of firms continued to note no change in compensation costs.

Retailers’ perceptions of future broader economic conditions reflected less optimism in October. The index of future general business activity dipped from 31.2 to 26.7. The index of future company outlook moved down from 31.1 to 25.5. 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: November 28, 2017

Data were collected Oct. 17–25, and 278 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

October 31, 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)
IndicatorOct IndexSep IndexChangeIndicator Direction*Trend** (Months)% Reporting Increase% Reporting
No Change
% Reporting Decrease

Revenue

19.2

15.9

+3.3

Increasing

95

35.0

49.2

15.8

Employment

8.3

3.5

+4.8

Increasing

92

17.6

73.1

9.3

Part–Time Employment

4.1

2.1

+2.0

Increasing

16

7.6

88.9

3.5

Hours Worked

7.8

2.7

+5.1

Increasing

12

12.1

83.6

4.3

Wages and Benefits

16.9

15.6

+1.3

Increasing

97

18.8

79.3

1.9

Input Prices

28.6

25.2

+3.4

Increasing

102

28.9

70.8

0.3

Selling Prices

10.2

4.7

+5.5

Increasing

20

14.1

82.0

3.9

Capital Expenditures

19.4

14.8

+4.6

Increasing

98

22.5

74.4

3.1

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

Company Outlook

16.4

7.7

+8.7

Improving

16

21.6

73.2

5.2

General Business Activity

18.6

12.4

+6.2

Improving

14

23.9

70.9

5.3

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

Revenue

47.9

45.7

+2.2

Increasing

104

55.7

36.5

7.8

Employment

29.4

24.9

+4.5

Increasing

103

35.7

58.0

6.3

Part–Time Employment

15.0

8.7

+6.3

Increasing

64

18.4

78.2

3.4

Hours Worked

9.4

4.3

+5.1

Increasing

14

12.7

84.0

3.3

Wages and Benefits

43.8

43.7

+0.1

Increasing

130

45.2

53.4

1.4

Input Prices

45.6

47.1

–1.5

Increasing

130

46.8

52.0

1.2

Selling Prices

27.9

29.9

–2.0

Increasing

102

32.2

63.5

4.3

Capital Expenditures

30.4

29.7

+0.7

Increasing

103

36.9

56.6

6.5

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

Company Outlook

32.4

29.4

+3.0

Improving

20

38.7

55.0

6.3

General Business Activity

30.5

28.0

+2.5

Improving

20

33.9

62.7

3.4

Texas Retail Outlook Survey

October 31, 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)
IndicatorOct IndexSep IndexChangeIndicator Direction*Trend** (Months)% Reporting Increase% Reporting
No Change
% Reporting Decrease
Retail Activity in Texas

Sales

17.7

32.8

–15.1

Increasing

3

35.9

46.0

18.2

Employment

8.0

0.9

+7.1

Increasing

2

12.5

83.0

4.5

Part–Time Employment

3.7

–3.2

+6.9

Increasing

1

7.3

89.1

3.6

Hours Worked

7.5

5.1

+2.4

Increasing

4

10.3

86.9

2.8

Wages and Benefits

18.5

20.0

–1.5

Increasing

80

19.7

79.1

1.2

Input Prices

32.2

26.4

+5.8

Increasing

21

33.5

65.2

1.3

Selling Prices

23.8

18.6

+5.2

Increasing

6

27.3

69.2

3.5

Capital Expenditures

25.0

17.8

+7.2

Increasing

15

25.0

75.0

0.0

Inventories

6.0

5.9

+0.1

Increasing

13

21.0

64.0

15.0

Companywide Retail Activity

Companywide Sales

12.9

25.6

–12.7

Increasing

3

30.9

51.1

18.0

Companywide Internet Sales

10.9

14.7

–3.8

Increasing

9

15.8

79.3

4.9

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

Company Outlook

19.6

22.8

–3.2

Improving

3

22.7

74.2

3.1

General Business Activity

22.0

19.3

+2.7

Improving

5

22.0

78.0

0.0

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

Sales

46.8

33.7

+13.1

Increasing

104

51.6

43.6

4.8

Employment

23.7

13.0

+10.7

Increasing

5

25.1

73.5

1.4

Part–Time Employment

12.7

3.7

+9.0

Increasing

2

15.7

81.3

3.0

Hours Worked

7.9

2.3

+5.6

Increasing

3

10.6

86.7

2.7

Wages and Benefits

35.2

32.7

+2.5

Increasing

106

35.2

64.8

0.0

Input Prices

36.4

42.6

–6.2

Increasing

102

40.0

56.4

3.6

Selling Prices

33.9

40.0

–6.1

Increasing

102

37.7

58.5

3.8

Capital Expenditures

29.1

26.2

+2.9

Increasing

13

36.4

56.4

7.3

Inventories

10.2

14.8

–4.6

Increasing

12

22.5

65.2

12.3

Companywide Retail Activity

Companywide Sales

48.8

35.0

+13.8

Increasing

103

53.0

42.8

4.2

Companywide Internet Sales

23.0

13.7

+9.3

Increasing

15

25.6

71.8

2.6

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

Company Outlook

25.5

31.1

–5.6

Improving

11

29.6

66.3

4.1

General Business Activity

26.7

31.2

–4.5

Improving

14

27.0

72.7

0.3

*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

October 31, 2017

Downloadable chart

Texas Retail Outlook Survey

October 31, 2017

Downloadable chart

Texas Service Sector Outlook Survey

October 31, 2017

Comments from Survey Respondents

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

Data Processing, Hosting and Related Services

  • This is the best end-of-year outlook in a couple of years. Regulations are still overkill to get deals done, but buyers seem to be willing to push through the red tape to make purchases.

Credit Intermediation and Related Activities

  • The hurricanes were a problem for us.
  • The movement of fracture sand continues to be evident from the amount of trucks hauling sand primarily to the Permian Basin. The consumer traffic due to hunting season has certainly picked up. This will certainly help continue to push sales tax proceeds up for the county, which were steadily starting to move up in September over the previous month. Loan production continues to improve in our rural markets, now sitting at 50 percent loans/deposits due primarily to loan sharing from our metropolitan markets and primarily commercial real estate deals. The metropolitan locations are running 70–75 percent loans/deposits.
  • The Coastal Bend area is still dealing with the aftermath of Hurricane Harvey, so business remains relatively slow but only because of rebuilding activities rather than business opportunities.

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

  • Plant operations are in the Houston area and are still dealing with Harvey's venture into the area. Business has slowed due to flooding of areas, and workers and customers experiencing flooding, and all that goes with getting back to a norm, which may be some time.

Insurance Carriers and Related Activities

  • Hurricane Harvey had an impact on the volume of business we saw, especially out of the Houston area in September. Business activity is returning to normal in all areas affected by the storm.

Funds, Trusts and Other Financial Vehicles

  • Hurricane Harvey moved demand forward.

Real Estate

  • San Antonio continues to “chug” along. We are seeing good demand for commercial real estate, especially office and warehouse space from existing tenants and tenants new to the city.
  • Real estate is seasonal. After the summer, things slow down. People are more into holiday preparations, and the decline of daylight hours takes away time for showing homes.
  • We are still assessing the effects of Hurricane Harvey.

Telecommunications

  • We are still recovering from late August flooding in the Houston area. The area we serve near Missouri City was hardest hit, and we had over 350 customers that had two to four feet of water in their home or business. Out of the total customers we serve, approximately 420 suffered severe damage to their home or business. We lost approximately $40,000 in monthly recurring revenue and spent well over $500,000 to address damage from the flooding.

Professional, Scientific and Technical Services

  • We have been experiencing a slowdown in our residential and commercial order count year over year, and revenue has also been down for the past two months. This seems to indicate that this real estate cycle has definitely reached its peak. It is still a great market when you compare it to 2012 and 2013, but we are definitely seeing a slowdown.
  • Our business lines continue to believe that momentum and deal flow will remain through year-end. However, if the proposed tax reform legislation is not passed in 2017, it will likely slow down both the mergers and acquisitions and real estate markets.
  • The uncertainty of the future of NAFTA has made us take a "wait and see" attitude regarding investments and hiring.

Management of Companies and Enterprises

  • There is too much government regulation.

Administrative and Support Services

  • The restaurant industry continues to struggle in the casual dining group. As a result, we continue to see cutbacks in service. Some of this is being offset by the real estate and multifamily markets. Future growth will continue to come from real estate, multifamily and hospitality.
  • The corporate aviation sector has remained consistent month to month. There has been an increase in larger calendar-type airframe inspections since last month. We are forecasting an increase in cycle-type inspections before the end of the year. Commercial aviation has remained flat since last May. Newer aircraft that have been brought online are not required to use our services as of yet due to low cycles versus calendar times. This will not tick up until second quarter 2018. Industrial machine manufacturing shops for civilian items have seen a decrease in requests for quotation (RFQs) for the last two months. No increase is seen in the near future. Industrial machine manufacturing shops for military-use items has seen a decrease in RFQs for the last two months. We do see an increase in RFQs at the end of fourth quarter 2017. This fits our normal pattern from year to year. Oil equipment manufacturers have slowed their RFQs or put a hold on previous RFQs from September.
  • Increases are a result of fewer contracts ending than an increase in sales opportunities or customer demand increasing.

Educational Services

  • Tax reform would be a boost to the economic climate and aid in the country’s growth. We need tax cuts for all.

Ambulatory Health Care Services

  • We have finally recovered to pre-hurricane volumes. Collections are recovering as well. We will begin to again plan for the next capital improvement timing after the first of the year.
  • Hurricane Harvey adversely affected our company. We had damages to two of our buildings and were unable to offer services in those buildings. Also, we had employees who had damages to their homes and vehicles who were unable to report of work for the first few weeks of September. Also, our client base was affected by the loss of homes and vehicles. October is moving closer to being back to normal.
  • Activity in the fourth quarter each year has increased as patients come in before new-year deductibles kick in. This year appears to be consistent with prior years. The wage and benefits increase in six months will be due to increased health plan costs, not an increase in wages.
  • Hurricane Harvey impacted September results but no other months. The launch of a new division in September has created higher revenues than forecasted, and we anticipate this trend continuing in the short term. We recently broadened our service offerings for a large client, and that also has resulted in more activity than anticipated. The number of employees and related wages continues to increase with higher activity levels. The average workweek will be longer as we adapt to increased volumes but will settle down again as we approach the end of the year. Wages continue to climb as a result of tight labor-market conditions, affecting both new employees and current employees who know that conditions are favorable for them. Capital expenditures will increase at the start of the new year and the new budget cycle.

Hospitals

  • Federal and state governments continue to increase regulatory requirements on rural health systems while reducing funding. Insurance companies continue to reduce reimbursement while increasing premiums for higher-deductible plans, creating increased bad debt for health systems. Rural independent health systems are struggling to provide a long-term sustainable model for the communities we serve.

Amusement, Gambling and Recreation Industries

  • In downtown Austin, there are few businesses on Congress Avenue that cater to people because parking is virtually nonexistent, as is public transportation. Property taxes are so high that even many of the bigger nontech professional firms are moving out of downtown. Restaurants and bars are moving to the Domain, as is most of retail. This is just the tip of the iceberg. The upcoming challenge is CodeNEXT.

Accommodation

  • I surmise that due to the hurricane activity in September, we have seen a nice surge in business activity in October. Putting the two months together, our business activity will be slightly above our annual budgeted numbers.

Food Services and Drinking Places

  • Sales picked up beginning in the last part of September and are continuing to strengthen in October. We just took a price increase in early October. We are not showing any price increase on the six-month horizon because our targeted frequency is twice a year, and we will be just addressing or taking our next increase right at the end of the six-month horizon. We are showing wages and benefits up on the six-month horizon because we have a very substantial increase for medical benefits coming Jan. 1, 2018. Wages will also continue to move up, but we are still moving at a rate of slightly less than 2 percent annually.
  • We closed one location in September 2017 that was not performing well. Other comp store sales are still positive.
  • Our area and our resort were directly impacted by Hurricane Harvey. We expect to partially reopen on April 1, 2018, with a full reopen in early summer.

Religious, Grantmaking, Civic, Professional and Similar Organizations

  • Our center was impacted by the hurricane, and our facility was closed for six to seven weeks. This affected our revenue and level of business activity. We are now open. Many homes in certain sections of Houston were flooded, and this has caused concern whether our neighborhood in the long term will remain vital and strong.

Merchant Wholesalers, Durable Goods

  • We are investing heavily in capital projects through year-end due to low steel pricing.
  • The decreases in October when compared with September are a result of high September sales as a portion of our customer base responded quickly to the effects of hurricanes Harvey and Irma. Most of the increases down the road will come from internet-based activity.

Building Material and Garden Equipment and Supplies Dealers

  • After the hurricane, business was very slow. Now it's picking up.

Clothing and Clothing Accessories Stores

  • In October, Houston-area stores seem to be benefiting from the Astros being in the playoffs and World Series excitement, as well as some additional spending by flood victims.

Nonstore Retailers

  • Unique to our situation, we have been notified of a loss of about $1 million in annual revenues that will be transferred to a competitor. We expect this to be a short-term hit to our top line, as our sales team is rapidly placing new business.

 

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.

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