Skip to content

Texas Service Sector Activity Continues to Expand

Texas Service Sector Outlook Survey

Report in PDF

August 28, 2018

Texas Service Sector Activity Continues to Expand

What’s New This Month

For this month’s survey, Texas business executives were asked supplemental questions on the labor market. 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 continued to increase in August, albeit at a slower pace than last month, 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 25.4 in July to 21.5 in August.

Labor market indicators reflected continued employment growth and a notable lengthening of workweeks this month. The employment index remained largely unchanged at 11.5, and the part-time employment index rose to its highest level since mid-2014. The hours worked index rose from 9.1 in July to 11.8 in August, its highest value on record.

Perceptions of broader economic conditions continued to reflect optimism, despite elevated uncertainty. The general business activity index held flat at 21.5 in August. The company outlook index increased from 14.2 to 16.6. The capital expenditures index surged six points to a postrecession high of 23.4. However, the outlook uncertainty index, which began in January 2018 and asks, “How has uncertainty regarding your company’s outlook changed in the current month vs. prior month?” was mostly unchanged at 11.3 and near its highest reading for the year.

Price and wage pressures remained elevated this month. The wages and benefits index rose to a new high of 25.5, with a record 28.8 percent of respondents reporting wage increases. The selling price index rose one point to 14.2.

Respondents’ expectations regarding future business conditions reflected stronger optimism than last month. The future general business activity index increased from 25.5 to 27.4 in August, while the future company outlook index rose over three points to 29.8. Price and wage expectations remained elevated, with the future selling prices index rising to a five-month high. Indexes of future service sector activity, such as revenue and employment, also reflected higher expectations of future growth.

Texas Retail Outlook Survey

August 28, 2018

Retail Sales Strengthen

Retail sales accelerated in August, according to business executives responding to the Texas Retail Outlook Survey. The sales index jumped up from 6.0 in July to 25.8 in August. Inventories continued to rise, and the inventories index held steady at 18.4.

Retail employment accelerated and workweeks lengthened this month. The employment index picked up from 3.3 in July to 9.8 in August, with the part-time employment index jumping to a postrecession high of 14.0. The hours worked index rose nearly 13 points to 13.4.

Retailers’ perceptions of broader economic conditions reflected further optimism in August, although uncertainty increased. The general business activity index rose over four points to 13.7, while the company outlook index increased from 3.2 to 7.0. The outlook uncertainty index rose to 14.0, the highest value to date.

Retail price and wage pressures accelerated compared with July. The selling prices index picked up nearly eight points to 23.2. The wages and benefits index rose to a new high, surging from 21.1 in July to 37.5 in August.

Retailers’ perceptions of future broader economic conditions reflected optimism this month, although uncertainty increased notably compared with July. The index of future general business activity dipped to 17.6, while the index of future company outlook jumped nearly 16 points to 24.7. Other indexes of future retail sector activity, such as sales and employment, remained elevated.

The Texas Retail Outlook Survey is a component of the Texas Service Sector Outlook Surveythat uses information only from respondents in the retail and wholesale sectors.

Next release: September 25, 2018

Data were collected August 14–22, and 215 Texas service sector and 52 retail sector 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

August 28, 2018

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)
IndicatorAug IndexJul IndexChangeIndicator Direction*Trend** (Months)% Reporting Increase% Reporting
No Change
% Reporting Decrease

Revenue

21.5

25.4

–3.9

Increasing

104

37.7

46.1

16.2

Employment

11.5

11.9

–0.4

Increasing

102

18.9

73.7

7.4

Part–Time Employment

6.8

5.7

+1.1

Increasing

7

9.9

87.0

3.1

Hours Worked

11.8

9.1

+2.7

Increasing

22

14.4

83.1

2.6

Wages and Benefits

25.5

24.5

+1.0

Increasing

111

28.8

67.9

3.3

Input Prices

32.1

31.4

+0.7

Increasing

112

34.0

64.1

1.9

Selling Prices

14.2

13.2

+1.0

Increasing

30

19.2

75.8

5.0

Capital Expenditures

23.4

17.4

+6.0

Increasing

108

26.0

71.4

2.6

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

Company Outlook

16.6

14.2

+2.4

Improving

26

24.3

68.0

7.7

General Business Activity

21.5

21.1

+0.4

Improving

24

27.6

66.4

6.1

IndicatorAug IndexJul IndexChangeIndicator Direction*Trend** (Months)% Reporting Increase% Reporting
No Change
% Reporting Decrease

Outlook Uncertainty†

11.3

12.1

–0.8

Increasing

7

20.2

70.8

8.9

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

Revenue

46.8

44.1

+2.7

Increasing

114

55.7

35.5

8.9

Employment

31.2

28.9

+2.3

Increasing

113

36.4

58.4

5.2

Part–Time Employment

4.7

9.4

–4.7

Increasing

74

12.3

80.1

7.6

Hours Worked

7.9

9.1

–1.2

Increasing

24

11.0

85.9

3.1

Wages and Benefits

48.6

51.1

–2.5

Increasing

140

51.9

44.8

3.3

Input Prices

50.0

48.7

+1.3

Increasing

140

52.2

45.6

2.2

Selling Prices

37.6

35.0

+2.6

Increasing

112

41.8

53.9

4.2

Capital Expenditures

32.1

28.7

+3.4

Increasing

113

37.3

57.5

5.2

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

Company Outlook

29.8

26.1

+3.7

Improving

30

37.4

55.0

7.6

General Business Activity

27.4

25.5

+1.9

Improving

30

33.7

60.0

6.3

Texas Retail Outlook Survey

August 28, 2018

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)
IndicatorAug IndexJul IndexChangeIndicator Direction*Trend** (Months)% Reporting Increase% Reporting
No Change
% Reporting Decrease
Retail Activity in Texas

Sales

25.8

6.0

+19.8

Increasing

4

43.5

38.7

17.7

Employment

9.8

3.3

+6.5

Increasing

12

17.6

74.6

7.8

Part–Time Employment

14.0

0.0

+14.0

Increasing

1

18.0

78.0

4.0

Hours Worked

13.4

0.6

+12.8

Increasing

14

19.7

74.0

6.3

Wages and Benefits

37.5

21.1

+16.4

Increasing

90

42.3

52.9

4.8

Input Prices

31.9

29.4

+2.5

Increasing

31

38.9

54.1

7.0

Selling Prices

23.2

15.3

+7.9

Increasing

17

34.8

53.6

11.6

Capital Expenditures

23.1

11.1

+12.0

Increasing

25

25.0

73.1

1.9

Inventories

18.4

18.9

–0.5

Increasing

3

30.4

57.6

12.0

Companywide Retail Activity

Companywide Sales

28.2

1.6

+26.6

Increasing

4

41.7

44.8

13.5

Companywide Internet Sales

23.1

4.0

+19.1

Increasing

4

32.8

57.5

9.7

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

Company Outlook

7.0

3.2

+3.8

Improving

17

25.2

56.6

18.2

General Business Activity

13.7

9.4

+4.3

Improving

4

24.3

65.1

10.6

Outlook Uncertainty
Current (versus previous month)
IndicatorAug IndexJul IndexChangeIndicator Direction*Trend** (Months)% Reporting Increase% Reporting
No Change
% Reporting Decrease

Outlook Uncertainty†

14.0

9.4

+4.6

Increasing

3

24.0

66.0

10.0

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

Sales

30.3

22.1

+8.2

Increasing

114

45.9

38.4

15.6

Employment

14.6

14.9

–0.3

Increasing

15

22.8

69.0

8.2

Part–Time Employment

1.6

0.7

+0.9

Increasing

6

10.1

81.4

8.5

Hours Worked

6.2

4.0

+2.2

Increasing

13

11.3

83.6

5.1

Wages and Benefits

36.6

44.8

–8.2

Increasing

116

43.7

49.3

7.1

Input Prices

38.0

37.8

+0.2

Increasing

112

46.0

46.0

8.0

Selling Prices

40.4

26.4

+14.0

Increasing

112

44.7

51.1

4.3

Capital Expenditures

18.0

15.1

+2.9

Increasing

23

24.0

70.0

6.0

Inventories

7.9

4.0

+3.9

Increasing

22

25.5

56.9

17.6

Companywide Retail Activity

Companywide Sales

33.3

22.6

+10.7

Increasing

113

45.4

42.6

12.1

Companywide Internet Sales

20.6

13.1

+7.5

Increasing

25

32.4

55.9

11.8

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

Company Outlook

24.7

9.2

+15.5

Improving

21

37.4

49.8

12.7

General Business Activity

17.6

19.5

–1.9

Improving

24

27.0

63.6

9.4

*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.

†Added to survey in January 2018.

Data have been seasonally adjusted as necessary, with the exception of the outlook uncertainty index which does not yet have a sufficiently long time series to test for seasonality.

Texas Service Sector Outlook Survey

August 28, 2018

Downloadable chart

Texas Retail Outlook Survey

August 28, 2018

Downloadable chart

Texas Service Sector Outlook Survey

August 28, 2018

Comments from Survey Respondents

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

Pipeline Transportation

  • Our six-month outlook is clouded by the potential impact of import tariffs and related trade issues.

Data Processing, Hosting and Related Services

  • The local market remains very difficult for attracting competent software programming talent (at all levels). We are having to expand our recruiting searches nationally.

Credit Intermediation and Related Activities

  • A recent survey of business and industry leaders in the Coastal Bend area indicates a significant increase in business activity along with skilled labor shortages, which are increasing costs.
  • The news is that the Subchapter S tax treatment is being submitted for approval. This is the good news for Sub-S corporations that would be positive and reduce uncertainty.
  • Business activity remains strong with continued growth anticipated. Competition for products, services and the workforce continues to be at high levels in financial services.

Real Estate

  • The Texas Appraisal Licensing Board is causing major problems for appraisers in Texas, and this is going to result in fewer appraisers in the profession. The main impact will be on bankers trying to make loans. Delays and higher fees are the result.

Professional, Scientific and Technical Services

  • We are seeing far fewer people pursuing zoning changes for multifamily, and our building permit expediting is down significantly.
  • We continue to watch economic indicators closely. Favorable signs do exist (employment, gross domestic product, earnings, etc.), but the tough trade rhetoric is concerning. It is worrisome what the next tweet will bring. Markets appear to be processing that fine, although the Turkey matter seemed to create some unexpected consternation. We will be watching the runup to the midterms closely. The next few months could no doubt be interesting.
  • We have seen stronger economic pickups in recent months.
  • We desperately need help from Congress on the expansion of the H-2B visa program. We rely heavily on the program for supplemental labor. There is a huge shortage of entry-level labor in the Dallas market, which represents our single largest challenge.
  • The greatest area of uncertainty is the tariff situation. The tariffs imposed by the U.S. and the retaliation by other countries is giving our clients (large manufacturing companies) concern. While current proposal requests are strong, we worry that an escalating trade war could harm the economy.
  • Again, the uncertainty about NAFTA (North American Free Trade Agreement) is hurting our company. We can’t plan ahead if a key element in our market environment has so many dark clouds around it.
  • New work (for construction in six to eight months) continues to decline.
  • The fears of a recession have increased. The negative press and the turmoil are not helpful. Clients are becoming much more cautious, with fallback plans coming into play. It is not optimistic thinking; it is cautionary, conservative thinking.
  • We are starting to see some slowdown in real estate activity and are anticipating a slowdown based on increased trade tariffs.
  • The real estate market is definitely slowing down. All in all, it is still a great market, but orders are down about 20 percent on the residential side and 5 percent on the commercial side from their highs in 2015–2017.

Management of Companies and Enterprises

  • We are overregulated.

Administrative and Support Services

  • We are incurring cost increases in our product as a result of logistics and other cost increases. Some of our vendors are experiencing delays in obtaining raw materials, so there is some uncertainty in the supply lines.
  • We have our seasonal workers.
  • The robust economy has been very helpful. We are currently worried about the economic effect to our business caused by the sick leave act recently passed in San Antonio and Austin. We hope that the state of Texas will tamp it down and do away with it.

Educational Services

  • We are having trouble finding part-time workers.
  • I think the effects of tariffs on all-around end-product costs will be easy to absorb by consumers. Consumers in general understand that we need to endure a little pain to level the playing field in terms of trade.

Hospitals

  • Independent health systems (rural especially) continue to battle increased unfunded regulation and the consolidation of a few payers and health systems. The outlook for rural health systems is not great.

Nursing and Residential Care Facilities

  • In spring 2019, our company will be closing one business line of our operation, which will reduce revenue from that line, but it will also reduce expenses. The total number of employees will also be reduced due to this business-line closure.

Amusement, Gambling and Recreation Industries

  • Downtown Austin is rapidly changing with huge new buildings coming online and others just getting started or proposed. This constant construction has compounded doing business in the Central Business District. These projects are siphoning off employees, and the constant disruption has taken a toll on people even wanting to come downtown for eating and events. Add to that a fairly significant homeless population, challenged parking, new scooters zipping in and out everywhere and bikes, it is difficult for the long-term mainstream businesses to adjust.

Accommodation

  • It is hard to understand where the economy is headed. I do feel discretionary spending is down. I know we are not spending unless necessary.

Food Services and Drinking Places

  • We are stabilizing our recovery from Hurricane Harvey. Aside from delays in receiving insurance proceeds, things are going well.
  • Six months from now will include an annual price increase to offset raises and other cost increases from suppliers.
  • The availability of qualified talent continues to be a challenge.

Personal and Laundry Services

  • I am starting to get concerned with the health of the overall economy that will be impacted by the Fed raising interest rates in 2018 and the impact on the national debt, consumer credit card debt, mortgage rates, auto loans and student loans. I am also getting concerned with stock valuations and growth sustainability with my gloomy economic forecast.

Merchant Wholesalers, Durable Goods

  • The construction market is as strong as I’ve seen in a decade. Labor shortages are the biggest hurdle.
  • We are seeing continued strength in many areas: homebuilding, road building, commercial construction, mining, oil and gas, and commodities. All sectors are going strong in our markets.
  • Again, trade with China and Mexico has substantially affected our markets. Turkey was a major consumer of Texas’ scrap metal and has also been out of the market due to tariffs and its financial issues. Ultimately, Texas and most states are flooded with scrap metal, and the domestic demand is simply not sufficient, despite new steel pricing being near a record high.

Merchant Wholesalers, Nondurable Goods

  • The trade war between the U.S. and China caused an interruption to our business.
  • Price increases from our suppliers and freight issues continue to be a challenge.
  • July was a very bad month. We hope that with schools opening, business will pick up in August. Input prices are a major concern. We have just been advised by one of our major manufacturers that there will be a 10 percent across-the-board price increase. More price increases are expected. We hope that we can pass these price increases along to our customers. As more than 50 percent of our products are imported, the tariff situation is a major worry. Also, the products we sell are those that are used every day and are not discretionary-purchase items. Our customers have limited funds and are not high-income people. Therefore, there is great uncertainty about the future and, more particularly, about the next six months and the Christmas season. Should the Fed continue on its path to increase interest rates at this time, we believe this will cause a recession. Caution is necessary. There are two economies: “Wall Street” and “Main Street.” They are not the same. “Main Street” is not healthy and needs all the help it can get. Interest rate increases are not a help.

Motor Vehicle and Parts Dealers

  • We are beginning to experience the normal slow decline in sales due to the normal cycle of auto and truck sales. After the longest sustained uptrend in sales, a decline is to be expected.
  • Tariffs in the auto business continue to be a looming concern. That has some bearing on uncertain business conditions.
  • Our business is very dependent on interest rates (mainly floor-plan expenses). Accordingly, we will be reducing inventories to adjust to the expected increases in the Fed funds rate. Business uncertainty for retail has definitely increased.
  • The threat of tariffs is concerning for input prices.

Building Material and Garden Equipment and Supplies Dealers

  • Cooler weather and some much-needed rainfall have improved consumer demand in our industry.
  • Business is good and looks steady for the near future. There is always uncertainty, but that’s the nature of business nowadays. Growth is controlled by labor shortage.

Clothing and Clothing Accessories Stores

  • Sales at border locations trail the rest of the chain.

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 Christopher Slijk at christopher.slijk@dal.frb.org.

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