Texas Service Sector Outlook Survey

February 25, 2020

Texas Retail Outlook Survey

February 25, 2020

*Shown is the number of consecutive months of expansion or contraction in the underlying indicator. Expansion is indicated by a positive index reading and denoted by a (+) in the table. Contraction is indicated by a negative index reading and denoted by a (–) in the table.

**Shown is the number of consecutive months of improvement or worsening in the underlying indicator. Improvement is indicated by a positive index reading and denoted by a (+) in the table. Worsening is indicated by a negative index reading and denoted by a (–) in the table.

†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

February 25, 2020

Downloadable chart

Texas Retail Outlook Survey

February 25, 2020

Downloadable chart

Texas Service Sector Outlook Survey

February 25, 2020

Comments from Survey Respondents

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

Utilities

• The impact of the coronavirus on the economy is still unknown. This has increased uncertainty.
• I feel the business environment is getting better.

Pipeline Transportation

• Elections and the coronavirus’ impact on global demand and the regulatory environment are near-term uncertainty items.
• The impact of the coronavirus on global crude demand is a big unknown at this point—likely negative.

Support Activities for Transportation

• Our work is tied to international markets, and the coronavirus is disrupting global supply chains.

Warehousing and Storage

• We are cautiously watching the coronavirus’ impact on our customers who export oil to the Far East, including China. Overall, we are still bullish on general economic conditions in South Texas, as one additional Permian offtake pipeline will fully come online in the first quarter.

Publishing Industries (Except Internet)

• Conditions are generally the same. We are expecting revenue/business improvement during the first half of 2020.

Data Processing, Hosting and Related Services

• Finding and hiring high-caliber talent in Dallas–Fort Worth remains really tight.

Credit Intermediation and Related Activities

• There is lots of regulatory noise at the state and federal level in our fintech space.
• Liquidity within the market is still very tight, while demand for loans remains high.
• Economic activity has picked up, with the current installation of the wind-generation field, the new power transmission being erected through Central Texas and the installation of an additional oil pipeline network coming through the region. Activity should remain steady with the funding of two municipal bonds funded to add buildings to the school district and one to fund two major infrastructure projects for the city of Brady. Cattle prices are steady, with anticipation of higher prices as supplies continue to decline, but the impact of global market disruption may be a disrupter. Sheep and goat markets are still very strong, and grain commodities have been steady. Even with the recent snow across parts of Texas, January was one of the mildest temperature months in many years. If dry conditions persist, a mild winter would make it easier on livestock and producers. Spring moisture will be critical to farmers and ranchers.

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

• As a financial services company, we are sensitive to domestic and global economic and political conditions. In the near future, I am optimistic growth will continue, and the coronavirus impact will be contained and short term.

Insurance Carriers and Related Activities

• Property insurance due to storms in North Texas is increasing our costs and revenues.

Real Estate

• We are just focusing on working and ignoring the news.
• With the impeachment news over, buyers are confident about the economy.

Professional, Scientific and Technical Services

• There are coronavirus-related worries worldwide. However, we are not directly affected as we have no presence in China.
• The real estate market seems to be picking up steam after a short slowdown. Orders for both commercial and residential products have picked up dramatically the first month and a half of this year. Although this is an election year, we don't see anything in the near future that will affect this trend.
• January has been much better than we forecast. Our outlook for 2020 has improved.
• January was one of the four best months of the last three years. Likewise, we wrote a record number of proposals in January (though our return rate was less than normal.) Finding talent remains a major growth constraint.
• President Trump continues to cast uncertainty on the future of the country.
• We finished 2019 strong and came into 2020 with good momentum. That pace has maintained and, in some areas, improved. However, the impact of the coronavirus and the looming election cycle will likely impact investor and CEO confidence in the short and medium term.
• The new tax policies have caused some of my clients to expand their businesses. As I work with those clients, I am gaining more referrals for new clients. The overwhelming majority of my clients are positive about the economic outlook and the future health of their business.
• We continue to see good demand for legal services.

Administrative and Support Services

• We sell travel. Covid-19 [coronavirus] is having a dramatic impact on clients’ desire to plan trips for the future, and we have seen many cancellations. Cruise sales will take the brunt of the cancellations.
• General concern about the energy sector is weighing against otherwise-improving market conditions. The question is, what happens when interest rates increase as a result of a growing fiscal deficit?
• We have a new CEO, and things are moving in the right direction.
• The aviation-corporate sector has remained constant with RFQs [request for quotations] on par with last year. The aviation-commercial sector has increased with AOG [aircraft on ground] needs increasing over the last 30 days. The industrial-oil sector has remained flat with no change from last month. The industrial-machine shop sectors have increased with the acceptance of the majority of RFQs approved. The military-aviation sector has remained constant with more RFQs being generated for overseas (OCONUS) operations.
• We can’t find employees.
• Weather has been an issue.
• There will be more activity at the end of the first quarter due to the nature of our contracts. We will be hiring more employees, and we will have to acquire new computers to accommodate the technology to provide our services.

Educational Services

• The national economy and the local Texas economy are firing on all cylinders right now, because the policies instituted on both fronts are very similar—pro-growth. The trade worries have abated, but we look forward to phase II of the China trade saga. The population growth in Texas is occurring because of migration from higher-tax states, and this is benefiting companies in both the public and private arena; our job offerings continue to grow and expand. There is indeed a tremendous amount of optimism among the public in general, and that equates to economic activity. The consumer represents almost 70 percent of the GDP [gross domestic product], so optimism breeds consumerism, and that's what is needed if we are to continue to grow in the 3 percent range. There is a lot to be happy about. The country has the wind to its back as we roll into the November election. Hard to beat that.

Ambulatory Health Care Services

• The coronavirus looks to certainly impact us sooner or later. Supply chain disruptions are coming. Already, I am unable to obtain specialized latex probe covers for some reason. Imagine the vast amounts of medical supplies, antibiotics and pharmaceuticals that come out of China.
• In the home health sector, CMS’ [Centers for Medicare & Medicaid Services] redesign of services has triggered significantly higher costs for compliance and a lower reimbursement mechanism. This is leading to a significant number of individual operators exiting the home health business. Across the state of Texas, I am expecting a significant ceasing of home health operators, leading to higher readmission rates to hospitals and nursing homes.
• This month’s limerick: Political season makes all of the candidates want to chime; that a vote for them will improve the economy on a dime; present economic theory can be a puzzle; low rates cause investors to guzzle; yield curves keep inverting—will the end be different this time?

Museums, Historical Sites and Similar Institutions

• We are pushing our administration to increase wages for long-term employees who have received very low historical compensation. This is a new tact for us.

Amusement, Gambling and Recreation Industries

• We have a base lease rate of $16 per square foot in one of the best-located buildings in downtown Austin. In 2025, that rate will surely triple when the current lease expires. As with any small-to-medium-sized business, this is a huge mountain to climb. It is also why we have seen many businesses in the downtown corridor go out of business or just simply choose not to continue to operate, as their leases and/or property taxes continue to skyrocket. Our challenge will be how to manage these increases. One bright spot is that the experts in this field are seeing slight cracks in the high rents. There are many new high-rise buildings in various stages of completion, which will add lots of square footage to the current inventory. Of course, this is on top of the severe labor shortage, rapidly rising property taxes and health insurance costs. It should be an interesting few years.

Accommodation

• Our industry has begun to feel the effect of the coronavirus—particularly on the West Coast and other gateway cities. We continue to closely monitor it.

Food Services and Drinking Places

• Our business is still strong, with positive comps in sales and profitability.
• I am still balancing my income and expenses in relation to the effects of the tornado we had in October 2019.

Repair and Maintenance

• Lower interest rates and pro-business policies are making a difference.

Food Services and Drinking Places

• I am waiting for the geopolitical shoe(s) to drop.

Merchant Wholesalers, Durable Goods

• Absent a slight positive impact (10 percent) from the sale of safety products due to the coronavirus, our sales were flat in January compared to a year ago. While we are still optimistic 2020 will be a good year, there is the uncertainty related to the impact of our supply chain as it relates to the ability to receive products from China.
• China is again a factor.
• We are affected by the U.S. government tariffs and political concerns of the Asian shareholders. We are insecure about continued investment in the U.S. The U.S. operations will go to Asia soon.

Merchant Wholesalers, Nondurable Goods

• I'm not sure if the coronavirus will have an effect on our business. We don't trade with China, but indirectly, their consumption (or lack of) will influence protein prices (our input costs). I was more concerned with African swine flu and the impact it’s had on the Chinese herd. China has greatly increased their consumption of alternative proteins (chicken and beef), which has driven up costs domestically (or at least created a pretext for suppliers to do so).

Motor Vehicle and Parts Dealers

• We believe election uncertainty has faded due to the outcome of the impeachment trial. There continues to be wage pressure and difficulty hiring employees.
• Sales activity is fine. Maintaining a positive margin on new vehicle sales is impossible.
• General business in our firm is definitely off some because of the winter weather. Spring [business] should increase significantly we think.

Clothing and Clothing Accessories

• There are lower sales, inventories and number of employees due to store closings.

Historical Data

Historical data can be downloaded dating back to January 2007.

Indexes

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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.