Texas Service Sector Outlook Survey

April 30, 2019

Texas Retail Outlook Survey

April 30, 2019

*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

April 30, 2019

Downloadable chart

Texas Retail Outlook Survey

April 30, 2019

Downloadable chart

Texas Service Sector Outlook Survey

April 30, 2019

Comments from Survey Respondents

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

Data Processing, Hosting and Related Services

• Is it difficult to find really good talent. Our searches take three times longer than they did a year or two ago. We are not sure if increasing our benefits package has helped us with attracting new talent, but it seems to have helped with retention of our current team members.

Credit Intermediation and Related Activities

• As a result of the layoffs from the frac sand mines and the complete closing of several sand mines, the volume of retail sales has dropped, especially fuel sales, due to the impact of substantially reduced sand- trucking transportation. There is concern over the potential closing of the short rail to Brady due to the reduction of sand materials being shipped out by rail. I would say half of the 360+ employees are being employed by the West Texas sand-mining companies and 44 of the employees are being hired by a California company to mine surface sand for landscaping purposes on golf courses and housing development on the West Coast and expanding into the Texas market.

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

• It is still a tough market (primarily supplying oil and gas) with cost increases that can't yet be passed on in selling prices. Costs include property tax, insurance, etc.
• Finding quality employees continues to be our biggest struggle. Lack of a qualified workforce is our leading contributor to stalled growth.

Insurance Carriers and Related Activities

• With lower mortgage rates, we see increasing home transactions and continued commercial real estate strength.

Real Estate

• The upper end of the housing market is slower than in 2018 despite very positive economic conditions. Since the November elections, we feel the rhetoric and polarization in D.C. have created a wait-and-see attitude among higher-income households that might have considered a housing change.
• My outlook for our company has not changed, but I can’t see any reason for optimism in general business activity. There is no resolution in sight for the immigration issue or the tariff issue. The president is penalizing the border cities for Congress' lack of progress on immigration and not backing his wall, which has a direct impact on business in the U.S. and trade with Mexico. With the tariff impact and the border closure impact, it will be a miracle if we don't start seeing an impact on employment.
• President Trump is doing a good job for our economy.

Professional, Scientific and Technical Services

• We are really in a holding pattern for now. We are watching earnings season closely as well as other economic indicators being reported. Earnings and other indicators surfacing seem to be more favorable than expected, but there is some concern that will turn later. (Consumer sentiment is good, and jobs are OK.) The hard line on Iran is no doubt impacting oil prices, and we will be watching closely to see what happens here. If that oil leaves the market, who makes up for it? Given the difference in crude coming out of Iran, we are not sure Texas fills that shortfall (or the U.S. generally). We will be watching negotiations with China as well. We are in a precarious position on a number of fronts so markets could turn sharply with bad news. We are pleased to see better numbers out of China, if anyone actually believes you can fully rely on them. The Mueller report and continued coverage are concerning as well. There continues to be political uncertainty domestically that has the potential to impact markets, too. (And let's not forget Brexit, although that can has been kicked yet again.) I do hope Chairman Powell holds the course and ignores this administration.
• We simply cannot find enough legal entry-level workers to complete our work. We are actively turning away new business, as despite all efforts including pay increases, hiring and referral bonuses, etc., we are unable to keep a full staff. In past years, we've relied on the H-2B visa program, but due to increasing use of the program, we found ourselves unable to obtain visas this year. We will ultimately lose close to $2 million in revenue this year due to lack of available labor.
• We believe a downturn is starting to gestate.
• President Trump is the biggest uncertainty. His handling of the Iranian nuclear deal is making a real mess out of the energy business.
• Many baby boomers are pretty clueless as to how high business valuations are right now, and this lofty level we believe is going to decline in the next 12–18 months as too many decide to come on the market and sell their companies. In our opinion, those that think that they will want to sell in the next 24–36 months need to be sure that they have their company positioned to sell. We call this process here a “readiness review.”
• Construction prices remain high, but I have some optimism that sellers are being more reasonable in their pricing. I have grave concerns that the city of Dallas’ changes to the building code will further increase construction costs, making projects harder to do. More importantly, the city's new affordable housing policy is killing projects at a record rate during the due diligence process. It may be a noble endeavor, but sellers are unwilling to reduce their pricing for this social policy. Affordable units cost developers significant money.
• The position the U.S. is holding in the world is one of uncertainty and hesitation. We need to be sure that Texas remains the growth capital in the U.S. and that our pursuits of firms to locate here do not diminish.
• The mergers and acquisitions market is starting to pick back up. The real estate market has improved a bit but is still not as strong as prior years. Controversy work (litigation and restructuring) in Texas has increased.
• The Dallas–Fort Worth real estate market has continued to level off with the residential market showing signs of strengthening. After months of seeing residential orders on the decline, they are now beginning to recover year over year. Commercial orders have declined slightly year over year, but we still remain bullish for the remainder of 2019.

Administrative and Support Services

• There is a natural increase in activity for our contracts during the spring and summer months.
• We see a solid economy. People are working, and that increases business.

Waste Management and Remediation Services

• Because of a pullback by China in buying scrap materials (due to environmental issues, tariffs and political jockeying), selling prices for scrap commodities, especially fiber (corrugated) are at a 10-year low. A slowdown in manufacturing and abundant supplies also has decreased the demand side for new corrugated products.

Educational Services

• Trade and continued fiscal policy (supply side) can help drive the engine of growth.

Ambulatory Health Care Services

• Health care services’ most significant cost component is the labor only. With the Permian Basin energy sector driving the significant shortage of staff in all areas, the cost of labor went up significantly for health care providers. This is even as revenue from medical insurance declined due to increased managed care payers paying less for medical service providers. This finds health care providers with an increasing cost of service with decreasing year-over-year revenue.

Hospitals

• Continued unfunded mandates from the state legislature and Congress concern me about the stability of an independent rural health system.

Social Assistance

• We have seen funding decrease.

Amusement, Gambling and Recreation Industries

• All of Austin is facing the same major issue around the lack of good employees to hire, particularly in the service sector. We are not only competing with each other but with the robust construction that is going on and the influx of tech companies that are willing to train and pay people at the entry level at or over $15 an hour. This is putting an upward pressure on wages, wage-related costs and then selling prices. Even as we adjust our wages, the lack of qualified employees does not improve. We are simply trying to be sure the good employees we have will not go somewhere else.

Accommodation

• Nothing remarkable is currently anticipated. As the saying goes, no news is good news.

Food Services and Drinking Places

• Our business continues to be strong. We are experiencing positive same-store sales in all markets.
• The labor market remains tight, and input costs continue to rise. We saw a significant gain in same-store sales from March to April—a rather large swing for such a short period of time. We are a quick-service restaurant chain in Central and South Texas and operate on a 13-period, 28-day accounting system. We are good at tracking our sales by day segments against the exact days a year ago. March was really slow!

Religious, Grantmaking, Civic, Professional and Similar Organizations

• In the health care field, the uncertainty of the reimbursement level is a hindrance to planning and capital investments.

Merchant Wholesalers, Durable Goods

• It is a great year. Construction is strong.

Merchant Wholesalers, Nondurable Goods

• We see road construction in our area and increased cost of transportation due to gas prices and lack of drivers in the trucking industry.

Motor Vehicle and Parts Dealers

• Inventories are too high. Interest rates have dramatically increased the cost of carrying inventory and doing business in general. The Fed [Federal Reserve] misjudged the market the last two years, and those are costly mistakes. Many of the articles you read about the automobile industry are misleading. The SAAR [seasonally adjusted, annulized rate] is overstated with rental and fleet units. 2018 was a difficult year for many retailers as profits dropped dramatically from 2017. You must take that into consideration when you hear positive trends for 2019 if, and when, you read profits are up.
• We see continued inventory pressure from auto manufacturers in a softer sales environment. Expect inventories to drop as the year progresses. Wages will remain constant with little change due to expected downward pressure on sales.
• We have made significant management changes, which is the reason our business outlook has improved and our employee head count is increasing.

Building Material and Garden Equipment and Supplies Dealers

• We started to slow down in December of last year, and January was a bad month in what we thought was due to weather. Year to date we are running about 5 percent less than a year ago. Hopefully, the market will pick up, but activity seems somewhat slower than we had projected.
• Weather conditions improved somewhat in April over March, leading to increased consumer demand. However, the better weather was offset by the negative impact of consumers from the 2017 tax act, which increased taxes on most of our customers, reducing the tax refunds they normally receive during the spring season. Now the Texas Legislature is considering sales tax hikes, which would further reduce consumer disposable income and increase the cost of retail purchases.

Clothing and Clothing Accessories Stores

• Sales at stores near the Mexican border continue to drop at double digit rates.

General Merchandise Stores

• We exited a high-ticket category (appliances) that will have an impact on our top-line sales. All else being equal, we expect revenues to remain consistent six months from now.

Historical Data

Historical data can be downloaded dating back to January 2007.

Indexes

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All Data

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