Skip to content

Texas Service Sector Activity Accelerates

Texas Service Sector Outlook Survey

Report in PDF

September 25, 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 impact of tariffs. Results for these questions from the Texas Manufacturing Outlook Survey, Texas Service Sector Outlook Survey and Texas Retail Outlook Survey have been released together. Read the Special Questions results.

Texas service sector activity accelerated 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, increased from 21.5 in August to a four-year high of 26.9 in September.

Labor market indicators reflected continued employment growth and longer workweeks this month. The employment index increased from 11.5 to 13.8. The hours worked index declined nearly five points but remained positive at 6.9.

Perceptions of broader economic conditions reflected more optimism despite ongoing uncertainty. Both the general business activity index, which increased to 25.6, and the company outlook index, which rose to 21.2, reached their highest levels since 2014. The outlook uncertainty index fell from 11.3 to 9.0 but was above its average for the year thus far.

Price and wage pressures remained elevated this month. The wages and benefits index fell nearly four points to 21.6. The selling price index inched up from 14.2 in August to 15.4 in September.

Respondents’ expectations regarding future business conditions remained strongly positive. The future general business activity index was largely unchanged at 28.1, while the future company outlook index fell slightly to 28.1. Indexes of future service sector activity, such as revenue and employment, also reflected heightened expectations for future growth.

Texas Retail Outlook Survey

September 25, 2018

Retail Sales Growth Remains Solid

Retail sales continued to grow in September, according to business executives responding to the Texas Retail Outlook Survey. The sales index dipped slightly from 25.8 in August to 24.2 in September. Growth in inventories picked up, with the inventories index rising nearly four points to a 12-month high of 22.3.

Retail employment accelerated and workweeks lengthened this month. The employment index rose from 9.8 to 17.9, its highest level since mid-2014. The hours worked index fell nearly 10 points but remained positive at 3.5.

Retailers’ perceptions of broader economic conditions reflected increased optimism in September. The general business activity index rose from 13.7 to 21.2, while the company outlook index surged nearly 16 points to 22.7.

Retail price pressures increased and wage pressures eased, but both remained elevated in September. The selling prices index picked up over six points to 29.5. The wages and benefits index declined sharply but was positive at 15.0.

Retailers’ perceptions of future economic conditions remained strong this month. The index of future general business activity increased from 17.6 to 20.5, while the index of future company outlook declined slightly from 24.7 to 22.1. Other indexes of future retail sector activity, such as sales and employment, saw a notable pickup compared with last month.

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: October 30, 2018

Data were collected September 11–19, and 226 Texas service sector and 45 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

September 25, 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)
Indicator Sep Index Aug Index Change Indicator Direction* Trend** (Months) % Reporting Increase % Reporting
No Change
% Reporting Decrease

Revenue

26.9

21.5

+5.4

Increasing

105

37.2

52.5

10.3

Employment

13.8

11.5

+2.3

Increasing

103

21.4

71.0

7.6

Part–Time Employment

5.4

6.8

–1.4

Increasing

8

9.9

85.6

4.5

Hours Worked

6.9

11.8

–4.9

Increasing

23

11.0

84.9

4.1

Wages and Benefits

21.6

25.5

–3.9

Increasing

112

23.6

74.5

2.0

Input Prices

28.5

32.1

–3.6

Increasing

113

30.8

66.9

2.3

Selling Prices

15.4

14.2

+1.2

Increasing

31

18.2

79.0

2.8

Capital Expenditures

18.5

23.4

–4.9

Increasing

109

22.7

73.1

4.2

General Business Conditions
Current (versus previous month)
Indicator Sep Index Aug Index Change Indicator Direction* Trend** (Months) % Reporting Improved % Reporting
No Change
% Reporting Worsened

Company Outlook

21.2

16.6

+4.6

Improving

27

24.8

71.7

3.6

General Business Activity

25.6

21.5

+4.1

Improving

25

28.6

68.4

3.0

Indicator Sep Index Aug Index Change Indicator Direction* Trend** (Months) % Reporting Increase % Reporting
No Change
% Reporting Decrease

Outlook Uncertainty†

9.0

11.3

–2.3

Increasing

8

19.3

70.4

10.3

Business Indicators Relating to Facilities and Products in Texas
Future (six months ahead)
Indicator Sep Index Aug Index Change Indicator Direction* Trend** (Months) % Reporting Increase % Reporting
No Change
% Reporting Decrease

Revenue

46.9

46.8

+0.1

Increasing

115

55.2

36.4

8.3

Employment

32.1

31.2

+0.9

Increasing

114

36.4

59.3

4.3

Part–Time Employment

10.9

4.7

+6.2

Increasing

75

16.0

78.9

5.1

Hours Worked

8.7

7.9

+0.8

Increasing

25

12.7

83.3

4.0

Wages and Benefits

49.2

48.6

+0.6

Increasing

141

51.5

46.2

2.3

Input Prices

46.9

50.0

–3.1

Increasing

141

47.8

51.3

0.9

Selling Prices

33.7

37.6

–3.9

Increasing

113

39.2

55.3

5.5

Capital Expenditures

28.4

32.1

–3.7

Increasing

114

34.2

60.0

5.8

General Business Conditions
Future (six months ahead)
Indicator Sep Index Aug Index Change Indicator Direction* Trend** (Months) % Reporting Improved % Reporting
No Change
% Reporting Worsened

Company Outlook

28.1

29.8

–1.7

Improving

31

35.2

57.7

7.1

General Business Activity

28.1

27.4

+0.7

Improving

31

34.1

60.0

6.0

Texas Retail Outlook Survey

September 25, 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)
Indicator Sep Index Aug Index Change Indicator Direction* Trend** (Months) % Reporting Increase % Reporting
No Change
% Reporting Decrease
Retail Activity in Texas

Sales

24.2

25.8

–1.6

Increasing

5

40.9

42.3

16.7

Employment

17.9

9.8

+8.1

Increasing

13

24.3

69.3

6.4

Part–Time Employment

2.3

14.0

–11.7

Increasing

2

11.4

79.5

9.1

Hours Worked

3.5

13.4

–9.9

Increasing

15

12.0

79.5

8.5

Wages and Benefits

15.0

37.5

–22.5

Increasing

91

17.6

79.8

2.6

Input Prices

31.5

31.9

–0.4

Increasing

32

38.3

54.9

6.8

Selling Prices

29.5

23.2

+6.3

Increasing

18

34.7

60.1

5.2

Capital Expenditures

16.0

23.1

–7.1

Increasing

26

20.5

75.0

4.5

Inventories

22.3

18.4

+3.9

Increasing

4

33.1

56.1

10.8

Companywide Retail Activity

Companywide Sales

17.4

28.2

–10.8

Increasing

5

35.7

46.0

18.3

Companywide Internet Sales

6.9

23.1

–16.2

Increasing

5

20.6

65.7

13.7

General Business Conditions, Retail
Current (versus previous month)
Indicator Sep Index Aug Index Change Indicator Direction* Trend** (Months) % Reporting Improved % Reporting
No Change
% Reporting Worsened

Company Outlook

22.7

7.0

+15.7

Improving

18

27.8

67.1

5.1

General Business Activity

21.2

13.7

+7.5

Improving

5

26.7

67.8

5.5

Outlook Uncertainty
Current (versus previous month)
Indicator Sep Index Aug Index Change Indicator Direction* Trend** (Months) % Reporting Increase % Reporting
No Change
% Reporting Decrease

Outlook Uncertainty†

2.3

14.0

–11.7

Increasing

4

18.6

65.1

16.3

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

Sales

35.4

30.3

+5.1

Increasing

115

49.3

36.7

13.9

Employment

22.5

14.6

+7.9

Increasing

16

30.3

61.9

7.8

Part–Time Employment

1.2

1.6

–0.4

Increasing

7

10.8

79.6

9.6

Hours Worked

4.4

6.2

–1.8

Increasing

14

12.8

78.8

8.4

Wages and Benefits

45.9

36.6

+9.3

Increasing

117

49.0

47.9

3.1

Input Prices

34.9

38.0

–3.1

Increasing

113

37.2

60.5

2.3

Selling Prices

34.1

40.4

–6.3

Increasing

113

43.2

47.7

9.1

Capital Expenditures

11.6

18.0

–6.4

Increasing

24

20.9

69.8

9.3

Inventories

8.5

7.9

+0.6

Increasing

23

22.1

64.3

13.6

Companywide Retail Activity

Companywide Sales

33.6

33.3

+0.3

Increasing

114

45.5

42.7

11.9

Companywide Internet Sales

20.7

20.6

+0.1

Increasing

26

31.0

58.6

10.3

General Business Conditions, Retail
Future (six months ahead)
Indicator Sep Index Aug Index Change Indicator Direction* Trend** (Months) % Reporting Improved % Reporting
No Change
% Reporting Worsened

Company Outlook

22.1

24.7

–2.6

Improving

22

31.5

59.1

9.4

General Business Activity

20.5

17.6

+2.9

Improving

25

30.5

59.5

10.0

*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

September 25, 2018

Downloadable chart

Texas Retail Outlook Survey

September 25, 2018

Downloadable chart

Texas Service Sector Outlook Survey

September 25, 2018

Comments from Survey Respondents

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

Utilities

  • Forward energy prices have declined as ERCOT reserve margins appear to be sufficient for reliability. Wages and benefits are increasing as it becomes more difficult to identify and recruit high-skilled employees. As the trade war continues to ramp up, uncertainty in the future continues to increase and appears to be impacting long-term investment decisions. Hopefully, the current administration resolves these issues very soon.

Truck Transportation

  • We’re a trucking company, so the workweek time is set by government regulation. It stays constant.

Pipeline Transportation

  • Although the outlook for our company has improved, it is the result of completing capital programs initiated about 12–18 months prior. There is growing concern that the uncertainty caused by import tariffs and antidumping surcharges and the associated ripple effects domestically will have a dampening impact on growth and will certainly add delays to decision-making.

Support Activities for Transportation

  • Various tariffs on imported products and the tariffs being imposed by other countries are adding a great deal of uncertainty to the short-term future.

Publishing Industries (except Internet)

  • The political chaos continues while the general paths pursued are logical, but this comes with a growing risk of negative ripples globally from the style and drama. Business continues to be positive at this point in the U.S.

Credit Intermediation and Related Activities

  • Good rains have improved the country going into fall.

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

  • Revenue increases are expected due to additional capital that will be committed and managed by our firm. While merger-and-acquisition activity will continue to be strong for midsized companies, most Texas banks do not participate in highly leveraged transactions. When the midsized service companies in Texas are sold, they are generally financed by nonbank lenders.
  • The low unemployment rates are having a major impact on our ability to find qualified employees who can pass a background check and/or drug screening. We have positions that have now been open for one year or more. We are having to change strategies in hiring and retaining our employees. We are also being pushed to find greater automation options in some areas to deal with the shortage of qualified employees. This is getting to a point where it may stall our growth.

Real Estate

  • Large estates over $4 million are difficult to sell.
  • We are fairly well convinced that a recession will begin soon; therefore, we are restricting riskier investments and stockpiling more cash.

Professional, Scientific and Technical Services

  • The oil and gas market is heating up. We have seen an increase in engineering service needs and project starts.
  • We have been reading how the fracking industry is overleveraged and will remain wary of how this might affect future business.
  • We have seen a slight uptick in new-project proposals. There is approximately a three-month time lag between engineering work and construction start.
  • The overall economy is getting stronger by the month.
  • Continued turmoil with trade and rises in the U.S. dollar and in interest rates are impacting market deals. We are starting to see a slowdown in real estate business in New York that we expect will migrate to Texas by early next year.
  • Not much has changed in our outlook. Commercial and residential orders have leveled off, and revenue has done the same. It is looking like the real estate market is taking a wait-and-see attitude even though the economy remains strong. We will have to wait and see what kind of effect the trade negotiations and tariffs have on the economy before we will know where the market is headed.

Management of Companies and Enterprises

  • We continue to see economic growth in our area of the state. There are approximately $35 billion in plant expansions due to plentiful, affordable petrochemicals and natural gas. We are seeing, however, a shortage of affordable housing. This may well be caused by a housing market that has overbuilt for the median salary range in our market or a deeper problem of a slowdown. We continue to monitor.

Administrative and Support Services

  • The corporate aviation sector has increased its requests for on-site services. We are seeing more calls for wheel and tire inspections. To us, this has always equaled more flight-time utilization, which is a good sign. The commercial aviation sector has remained flat. The industrial sector has been interesting, and there have been many more RFQ (request for quotation) submittals The military sector has been increasing since last July. The overall inspection market has been increasing in completions. April of this year was our weakest month so far.
  • We have experienced a large amount of cost increases in our product lines as mergers have created a tighter supply market.
  • Weather has significantly impacted our operations in September, with large amounts of rainfall.
  • We were awarded a five-year large contract with the Department of Defense.
  • Uncertainty about interest rates affects major buying decisions.
  • We are expanding our services to include staffing different industries other than medical, which we have done for 15 years.
  • Things are going well in Texas.

Educational Services

  • I continue to be optimistic, with the rollback of regulations and the possibility of additional tax reform—two recipes that work in favor of growth.

Ambulatory Health Care Services

  • Increasingly limited access to traditional banking support has created a near-crisis level of inflexible liquidity. While Dodd–Frank and other regulations may have been stabilizing for some components of the economy, those same rules have created barriers that have resulted in stagnation for this company, with subsequent reductions in workforce and curtailed capital projects.
  • We have no international exposure—tariffs have no impact.

Nursing and Residential Care Facilities

  • Early 2019 will be a time of campus renovations and repositioning, including consolidating our health care services from two licensed long-term care/skilled nursing centers to one.

Social Assistance

  • Retail sales have improved; however, we cannot identify why. Therefore, we continue to be conservative with costs, not knowing if sales gains will continue. Wage cost is a growing concern. We are not seeing the increase in productivity to offset the wage increases, and it is much harder to find people for the openings.

Amusement, Gambling and Recreation Industries

  • Instead of focusing on the actual business (food and beverage operations), my job as CEO has increasingly become dealing with a lot of outside forces. For instance: the building is under construction and it is very difficult for our patrons to get in, streets around the building are blocked off because of constant construction, traffic to and from downtown Austin is horrific, health insurance costs are skyrocketing, premises insurance and car insurance increased because of Hurricane Harvey, paid sick leave is mandated for everyone, people have the perception it is dangerous to come to downtown, etc.

Accommodation

  • The current leadership in Washington is providing a great deal of uncertainty at the local level. Current deficits are growing exponentially, our immigration policies are not working and labor is as tight as I have ever seen it. The economy is good now because of the tax cuts and repatriation of billions from overseas. This stimulus will eventually run its way through our economy. We are not feeling overly optimistic at this time.

Food Services and Drinking Places

  • A wet September has slowed sales.
  • Children are going back to school, and there has been more focus on the children than eating out.
  • There are still challenges in recovering from Harvey. Insurance payments (particularly business interruption funds) have been unreasonably delayed.

Merchant Wholesalers, Durable Goods

  • Our sales growth for September compared to August will be mostly related to the sale of supplies and equipment to contractors responding to Hurricane Florence. The increase in the number of employees is related to the investment in creating and marketing a digital platform to round out the omni-channel experience for our customers. Hence, we expect continued growth in our internet sales.
  • The economy continues to look very strong in the near future. There are no signs of any sector letting up or slowing down.

Motor Vehicle and Parts Dealers

  • Business is still good, but I don’t see meaningful growth in the near term. I anticipate increases in prime interest rates, again. Margins are slim; expenses are increasing and profits are down.
  • Tariffs are still the biggest issue for import auto dealers. Some solution to this issue would certainly give us direction on the next six months and beyond.

Building Material and Garden Equipment and Supplies Dealers

  • There are no changes from the prior month. Concerns over inflation, trade and immigration policies continue.

Clothing and Clothing Accessories Stores

  • Hurricane Florence is hurting sales in the Southeast and Mid-Atlantic at this time.

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.