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Texas Service Sector Activity Moderates in April

Texas Service Sector Outlook Survey

April 26, 2022

Texas Service Sector Activity Moderates in April

What’s New This Month

For this month’s survey, Texas business executives were asked supplemental questions on labor market conditions and remote work. 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.

Activity in the Texas service sector decelerated in April, according to business executives responding to the Texas Service Sector Outlook Survey. The revenue index, a key measure of state service sector conditions, declined from 23.4 in March to 11.2 in April, as 30 percent of respondents reported increases in monthly revenues compared with 19.0 percent reporting declines.

Labor market indicators point to steady growth in hiring and hours worked relative to March. The employment index was unchanged at 14.5, although the part-time employment index weakened from 7.0 to 2.9. The hours worked index was flat at 9.5.

Perceptions of broader business conditions were positive, though muted compared with earlier in the year. The general business activity index slipped from 10.6 to 8.2, while the company outlook index held steady at 2.4. Uncertainty remained elevated, with the outlook uncertainty index falling just slightly from 22.5 to 19.2.

April saw continued upward pressure on wages and prices, though growth in wages and input prices eased slightly. The wages and benefits index fell from 36.5 to 33.0—still near a record high. The selling prices index was unchanged at 33.7, with 37 percent of respondents noting monthly price increases, while the input prices index declined five points to 54.2.

Respondents’ expectations regarding future business activity remained positive but moderated significantly compared with March. The future general business activity index plunged from 15.4 to 6.5—its lowest reading since mid-2020—while the future revenue index declined nine points to 47.0. Other future service sector activity indexes such as employment and capital expenditures weakened, suggesting somewhat lower expectations for growth over the next six months.

Texas Retail Outlook Survey

April 26, 2022

Texas Retail Sales Weaken in April

April retail sales activity deteriorated further compared with March, according to business executives responding to the Texas Retail Outlook Survey. The sales index, a key measure of state retail activity, weakened by five points to -7.9 in April. Retailers’ inventories stabilized, as the inventories index rose from -8.3 to -0.4.

Retail labor market indicators signaled continued growth in April. The employment index rose seven points to 9.3, while the part-time employment index held steady at 5.7. The hours worked index slipped two points to 2.5, suggesting a slower pace of growth in retail workers’ hours worked.

Retailers’ perceptions of broader business conditions remained somewhat pessimistic  compared with March. The general business activity index increased from -9.8 to 1.4—a neutral reading suggesting little net change in perceptions. The company outlook index improved but remained in negative territory at -4.9, with nearly 20 percent of respondents noting a worsening outlook. Uncertainty surrounding the outlook increased further, with the index rising from 7.5 to 14.6.

Retail price and wage pressures remained highly elevated in April. The selling prices index rose six points to a five-month high of 54.6, while the input prices index slipped from 59.7 to 55.3. The wages and benefits index held steady at 34.2, with 37 percent of respondents noting an increase in labor compensation compared with just 3 percent reporting a decrease.

With weaker retail activity in recent months, expectations for the future were somewhat mixed. The future general business activity index weakened from 3.0 to -1.5, while the future sales index declined from 37.9 to 34.9. Other indexes of future retail activity also showed mixed movements, suggesting increased uncertainty surrounding growth going into the second half of 2022.

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

Next release: June 1, 2022

Data were collected April 12–20, and 280 Texas service sector business executives, of which 48 were retailers, 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

April 26, 2022

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)
IndicatorApr IndexMar IndexChangeSeries
Average
Trend*% Reporting Increase% Reporting
No Change
% Reporting Decrease

Revenue

11.2

23.4

–12.2

11.3

21(+)

29.7

51.8

18.5

Employment

14.5

14.4

+0.1

6.5

21(+)

21.7

71.1

7.2

Part–Time Employment

2.9

7.0

–4.1

1.6

17(+)

8.9

85.1

6.0

Hours Worked

9.5

9.9

–0.4

2.8

20(+)

14.1

81.3

4.6

Wages and Benefits

33.0

36.5

–3.5

15.2

23(+)

35.5

62.0

2.5

Input Prices

54.2

59.2

–5.0

26.4

24(+)

56.6

41.0

2.4

Selling Prices

33.7

33.9

–0.2

6.6

21(+)

36.9

59.9

3.2

Capital Expenditures

13.2

15.2

–2.0

10.0

20(+)

18.9

75.4

5.7

General Business Conditions
Current (versus previous month)
IndicatorApr IndexMar IndexChangeSeries
Average
Trend**% Reporting Improved% Reporting
No Change
% Reporting Worsened

Company Outlook

2.4

2.7

–0.3

5.6

3(+)

15.9

70.6

13.5

General Business Activity

8.2

10.6

–2.4

4.1

16(+)

20.8

66.6

12.6

IndicatorApr IndexMar IndexChangeSeries
Average
Trend*% Reporting Increase% Reporting
No Change
% Reporting Decrease

Outlook Uncertainty†

19.2

22.5

–3.3

11.5

11(+)

27.0

65.3

7.8

Business Indicators Relating to Facilities and Products in Texas
Future (six months ahead)
IndicatorApr IndexMar IndexChangeSeries
Average
Trend*% Reporting Increase% Reporting
No Change
% Reporting Decrease

Revenue

47.0

55.8

–8.8

38.0

24(+)

56.0

35.0

9.0

Employment

33.0

40.6

–7.6

23.0

24(+)

39.6

53.8

6.6

Part–Time Employment

11.5

18.3

–6.8

7.0

23(+)

16.8

77.9

5.3

Hours Worked

7.3

13.0

–5.7

6.0

24(+)

12.4

82.5

5.1

Wages and Benefits

52.3

55.3

–3.0

36.9

24(+)

54.1

44.0

1.8

Input Prices

59.6

64.5

–4.9

44.1

184(+)

62.9

33.9

3.3

Selling Prices

41.6

49.5

–7.9

24.0

24(+)

45.1

51.4

3.5

Capital Expenditures

27.7

29.6

–1.9

23.6

23(+)

32.6

62.5

4.9

General Business Conditions
Future (six months ahead)
IndicatorApr IndexMar IndexChangeSeries
Average
Trend**% Reporting Improved% Reporting
No Change
% Reporting Worsened

Company Outlook

14.5

14.6

–0.1

17.1

21(+)

28.5

57.5

14.0

General Business Activity

6.5

15.4

–8.9

14.2

21(+)

23.7

59.1

17.2

Texas Retail Outlook Survey

April 26, 2022

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)
IndicatorApr IndexMar IndexChangeSeries
Average
Trend*% Reporting Increase% Reporting
No Change
% Reporting Decrease
Retail Activity in Texas

Sales

–7.9

–3.0

–4.9

5.4

2(–)

27.5

37.1

35.4

Employment

9.3

2.0

+7.3

2.0

9(+)

16.1

77.1

6.8

Part–Time Employment

5.7

5.4

+0.3

–1.5

14(+)

10.7

84.3

5.0

Hours Worked

2.5

4.5

–2.0

–1.7

3(+)

12.0

78.5

9.5

Wages and Benefits

34.2

33.7

+0.5

10.6

21(+)

37.2

59.8

3.0

Input Prices

55.3

59.7

–4.4

21.4

24(+)

60.6

34.1

5.3

Selling Prices

54.6

48.6

+6.0

13.3

23(+)

61.5

31.6

6.9

Capital Expenditures

11.3

13.5

–2.2

8.0

15(+)

14.1

83.1

2.8

Inventories

–0.4

–8.3

+7.9

1.9

4(–)

24.1

51.4

24.5

Companywide Retail Activity

Companywide Sales

0.5

–9.8

+10.3

6.9

1(+)

31.9

36.7

31.4

Companywide Internet Sales

6.1

2.6

+3.5

5.8

2(+)

22.5

61.1

16.4

General Business Conditions, Retail
Current (versus previous month)
IndicatorApr IndexMar IndexChangeSeries
Average
Trend**% Reporting Improved% Reporting
No Change
% Reporting Worsened

Company Outlook

–4.9

–10.8

+5.9

3.5

2(–)

14.0

67.1

18.9

General Business Activity

1.4

–9.8

+11.2

0.0

1(+)

18.8

63.8

17.4

Outlook Uncertainty
Current (versus previous month)
IndicatorApr IndexMar IndexChangeSeries
Average
Trend*% Reporting Increase% Reporting
No Change
% Reporting Decrease

Outlook Uncertainty†

14.6

7.5

+7.1

9.3

11(+)

22.9

68.8

8.3

Business Indicators Relating to Facilities and Products in Texas, Retail
Future (six months ahead)
IndicatorApr IndexMar IndexChangeSeries
Average
Trend*% Reporting Increase% Reporting
No Change
% Reporting Decrease
Retail Activity in Texas

Sales

34.9

37.9

–3.0

33.0

24(+)

50.8

33.3

15.9

Employment

21.8

31.8

–10.0

13.2

24(+)

33.2

55.3

11.4

Part–Time Employment

5.0

11.0

–6.0

1.8

21(+)

12.9

79.2

7.9

Hours Worked

3.7

13.7

–10.0

3.2

24(+)

11.3

81.1

7.6

Wages and Benefits

48.1

52.2

–4.1

28.8

24(+)

50.8

46.5

2.7

Input Prices

48.9

61.5

–12.6

34.0

24(+)

55.6

37.8

6.7

Selling Prices

42.6

57.5

–14.9

30.0

24(+)

51.1

40.4

8.5

Capital Expenditures

26.7

22.5

+4.2

18.0

23(+)

28.9

68.9

2.2

Inventories

27.8

19.7

+8.1

10.6

24(+)

42.9

42.1

15.1

Companywide Retail Activity

Companywide Sales

32.4

43.7

–11.3

31.6

24(+)

45.9

40.6

13.5

Companywide Internet Sales

17.1

34.5

–17.4

22.9

25(+)

25.7

65.7

8.6

General Business Conditions, Retail
Future (six months ahead)
IndicatorApr IndexMar IndexChangeSeries
Average
Trend**% Reporting Improved% Reporting
No Change
% Reporting Worsened

Company Outlook

4.9

7.7

–2.8

17.6

24(+)

24.6

55.7

19.7

General Business Activity

–1.5

3.0

–4.5

13.3

1(–)

19.5

59.5

21.0

*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

April 26, 2022

Downloadable chart

Texas Retail Outlook Survey

April 26, 2022

Downloadable chart

Texas Service Sector Outlook Survey

April 26, 2022

Comments from Survey Respondents

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

Utilities

  • There is uncertainty due to inflation.

Support Activities for Transportation

  • We are continuing to see cost of our "raw materials" (trailers to lease) being extremely elevated versus what the market is willing to pay.
  • The increased cost of fuel has had a significant negative impact on our bottom line. We are actively increasing customer rates to compensate.

Warehousing and Storage

  • We have definitely seen some beneficial impact of the sanctions against Russia in our domestic flows of oil and gas. We believe these will be incremental and capped at some point by the limitations on oil production by E&P [exploration and production] companies’ shareholders and by the lack of incremental liquefaction capacity for gas. Inflationary pressures remain, but not to the point that we are stopping or delaying any planned capital work.

Publishing Industries (Except Internet)

  • Some factors of risk have increased, but this has also helped create more interest in the companies’ software and platform that helps with efficiency, ease of use and a more positive user experience.

Data Processing, Hosting and Related Services

  • It's a double hit right now. Hiring talent is a key issue (minimal available talent), and that's slowing growth. Paying much more to retain employees is also slowing growth because higher wages leave fewer funds for hiring. Current employees are being attracted by 20 percent pay increases from other tech companies, and we already pay at rates above average.

Credit Intermediation and Related Activities

  • We are a vendor of services in the residential mortgage industry (regulation and technology). A punch line to an old mortgage joke: what do you think interest rates are going to do? One of our staff just got a $300 per month rent increase. Prices are up. Refinances (and hope for lower payments) are down. Housing inventory is down. Apartments converting to condos will be coming (if history is an indicator). With our efficiency and services, we are a downturn product, but just hanging in there is not fun. Things do not look particularly good right now.
  • The current economic outlook is rife with unknowns. The most obvious negative impact will be the rapidly rising cost of agriculture production. The drought conditions are adding to uncertainty about planting intentions and current animal stocking rates into the summer months. It appears that profit margins will continue to shrink, with increased inflation driving up costs for most businesses.
  • Inflation numbers are off the chart. Energy costs could be decreased if activity increased, but it does not appear current policymakers want this to happen. Hard landing is in the works and out of the control of the Federal Reserve.

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

  • Cost of tenant finish-out for new leases has increased, but rental rates are increasing as well to mainly offset the increased costs.
  • There is a painful lack of available employees who actually want to work and have the basic skill set to retain training.
  • Inflation is much higher than reported and is often unmeasurable.
  • One of the major issues is the amount of "lag" in collaborative partners in the professional services space.  Because they are having challenges keeping staffed up, it is causing service interruptions for us as well.

Insurance Carriers and Related Activities

  • There is increased emphasis on monitoring and reacting to the increase in costs with price changes.

Real Estate

  • In the Houston area, multifamily transaction volume is up substantially. Capital for apartment deals is readily available. Strong occupancy is allowing for significant rent increases. Optimism in the industry is high, but there is concern about the rapid and steep increase in asset prices being unsustainable.
  • All the headlines—rising inflation, interest rates and supply-chain disruptions—are raising the risk for recession in coming months.

Rental and Leasing Services

  • We survive by selling stuff. Our stuff is heavy construction equipment. Supply lines from our manufacturers are a train wreck. We sell over 100 pieces of equipment a month, but we may get 60 to 70 this month, and it's getting worse not better. There is nothing but uncertainty about the future! And the current problems existed before [President of Russia Vladimir] Putin. No telling the impact of the war on our vendors and supply lines; that's still an unknown.

Professional, Scientific and Technical Services

  • We just set an all-time record during March. There is a significant rate of positive change.
  • While there has been no significant changes from month to month, the overall uncertainty and anxiety level has certainly increased.
  • There is great uncertainty as to what happens when you rein in inflation by depressing consumer spending when the U.S. economy is 74 percent consumption based.
  • I am hoping the current oil price/demand will improve the capital spending in Texas and elsewhere. It will generally be in the upstream market and possibly in the fractionation of NGLs [natural gas liquids]. One additional fractionator was recently announced in the Mont Belvieu area.
  • Ongoing supply-chain issues along with the Ukraine war seem to be negatively affecting commercial real estate projects, but increased energy pricing seems to be having positive effects. We shall see.
  • Even with the increase in interest rates, the residential and commercial markets are running above a normal pace. We know at some point these rate increases will slow the market, but so far there is no change. All indications from the marketplace is we have a long runway before this happens.
  • The global supply chain is a mess. The current crisis at the border crossing points (increased truck inspection times) has increased the problems significantly.
  • We are very busy as COVID restrictions are letting up and more court cases are moving forward. 
  • There are myriad issues with the potential to impact the current business environment. We are waiting and watching for now. We could see material changes in the coming months—good or bad. We are remaining optimistic for now, but the position could change.

Administrative and Support Services

  • We are starting to see some price resistance and reductions in client budgets.
  • We continue to struggle finding employees. Even with increases in wages that are severely affecting our margins, we cannot hire. The work is there, just no one to do it.
  • Travel activity has resumed.
  • Luxury leisure trips lead the way to recovering in our industry. Obscene pricing with diminished services level due to lack of staffing is a threat to the recovery as well as talk of a future recession. Airlines have proved they are not able to deal with the passenger levels about to hit for the summer season. It is a perfect storm coming from many angles.
  • The markets and leading economists are seeing an increased likelihood of stagflation in the near-to-medium term.
  • Concerns about inflation, interest rates and international issues do not seem to be impacting financial performance.
  • I am feeling a slight softening in the market when it comes to hiring. There is still robust hiring going on but overall there seems to be a slight slowing to the new job requisitions coming out. It's more gut than science, but after 12 years, I listen to my gut. 
  • Inflation is gaining a foothold in our psychology, which is very dangerous. We are all beginning to plan, with inflation as a factor.

Educational Services

  • We have been raising prices so we can adjust for increases in labor, rent, energy and materials. Some of our customers have been priced out of our services for the transportation costs and labor costs we have given them. We are also out of space with existing customers. So, volume is down, but revenue is pretty flat.
  • Inflation is persistently high, and I fear we are headed for a recession, and the Federal Reserve’s tools are very limited.

Ambulatory Health Care Services

  • Interest in price transparency remains high as well as other uses of pricing data such as developing health networks for health insurers and TPAs [third-party administrators]. There is increased interest in using cash discount pricing instead of leasing health networks.
  • Wage pressure continues for employee retention. We are seeing borrowing costs going up rapidly as we contemplate future expansion.
  • Life seemed less stressful with QE [quantitative easing] rather than QT [quantitative tightening]; liquidity resulted in a huge equity purchasing spree; if the landing is not soft, investors will be left aloft; in the distance, you will hear wailing from the banshee.

Social Assistance

  • The climate for nonprofit social work is not good.

Amusement, Gambling and Recreation Industries

  • Supply chain is still causing maintenance problems.

Accommodation

  • We are still short-staffed for the level of business we have. We have not been able to open certain services that we typically offer due to this issue.

Food Services and Drinking Places

  • A lack of confidence and leadership coming from Washington, D.C., puts a lot of uncertainty into the economic outlook.
  • Back to office, business travel and shortage of available employees willing to work continue to be our main challenges.

Personal and Laundry Services

  • I am expanding by adding new locations in San Antonio and, therefore, my capital expenditures have increased.

Religious, Grantmaking, Civic, Professional and Similar Organizations

  • We provided $1,500 bonuses to all staff below SVP [senior vice president] level since we were understaffed in first quarter but did not lose any productivity. We continue to lose staff.

Merchant Wholesalers, Durable Goods

  • Supply chains continue to struggle with obtaining raw material needed for industrial, commercial and residential construction. Semiconductors are of particular concern with new waves of COVID restrictions from Asia.

Merchant Wholesalers, Nondurable Goods

  • Regarding general business conditions, I feel that "remained the same" is a bit of a misnomer. In a true sense of the word, there is relatively no change from the past six months, but in general, the outlook is still pretty bad. 

Motor Vehicle and Parts Dealers

  • We do not see the increase in interest rates to consumers slowing our auto business. Purchasing demand continues to be strong, and inventories are not improving. We hope to see some marginal improvement by late summer.
  • New-vehicle inventory declined as the chip shortage continues to limit production. Used-vehicle sales are declining slightly due to customer resistance to higher prices. Wholesale prices for used vehicles are declining. Service and parts sales are normal for this time of year.

Building Material and Garden Equipment and Supplies Dealers

  • Things are moving too fast. I'm making a fortune but was wrong about a slowdown. I hate to say it, but it needs to [slow]—things are getting too expensive.

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.

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