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Texas Service Sector Outlook Survey

Report in PDF
December 31, 2013

Texas Service Sector Activity Strengthens

Texas service sector activity picked up pace in December, according to business executives responding to the Texas Service Sector Outlook Survey. The revenue index, a key measure of state service sector conditions, advanced from 11.4 to 16, its highest reading since September 2012.

Labor market indicators also improved. The employment index rose from 3.9 to 9.7, indicating hiring picked up this month. The hours worked index edged up out of negative territory to 0.9, suggesting average workweek length held steady.

Perceptions of broader economic conditions reflected more optimism in December. The general business activity index rose slightly from 10.3 to 12.5. The company outlook index advanced from 5.5 to 10.7, with 19 percent of respondents reporting that their outlook improved from last month and 8 percent noting it worsened.

Price and wage pressures increased in December. The selling prices index moved up from 7.2 to 10.9. The wages and benefits index rose from 13.5 to 18.6, although the great majority of firms continued to note no change in compensation costs.

Respondents’ expectations regarding future business conditions reflected more optimism this month. The index of future general business activity ticked up to 22.2. The index of future company outlook edged up from 18.5 to 21.4. Indexes of future service sector activity, such as future revenue and employment, also rose in December.

Texas Retail Outlook Survey

December 31, 2013 

Retail Sales Continue Rising

Retail Sales Continue Rising

Retail sales climbed again in December, according to business executives responding to the Texas Retail Outlook Survey. However, the sales index fell from 20.3 to 15.2, suggesting slower growth. Inventories rose.

Labor market indicators improved despite slower sales growth. The employment index rose slightly from 9.1 to 13, indicating hiring picked up pace. The hours worked index jumped more than 10 points out of negative territory to 3 this month, suggesting slightly longer workweeks.

Retailers’ perceptions of broader economic conditions continued to reflect optimism in December. The general business activity index remained positive but dipped 2 points to 12.6. The company outlook index rose from 17.6 to 24.7, with 29 percent of respondents noting an improved company outlook over the prior month, compared with 4 percent reporting their outlook had worsened.

Retail price and wage pressures increased in December, suggesting prices rose at a faster pace than in November. The selling prices index surged 18 points to 21.6, its highest reading since August 2012. The wages and benefits index jumped from 6.5 to 20.2, although the great majority of firms noted no change in labor costs.

Retailers’ perceptions of future broader economic conditions continued to reflect optimism this month. The future general business activity index remained positive but fell 7 points to 24.4, while the index of future company outlook ticked up to 33.5. Indexes of future retail sector activity remained in solid positive territory this month.

The Texas Retail Outlook Survey (TROS) is a component of the TSSOS that uses information only from respondents in the retail and wholesale sectors.

The Dallas Fed conducts the Texas Service Sector Outlook Survey monthly to obtain a timely assessment of the state’s service sector activity. Data were collected Dec. 17–24, and 201 Texas business executives responded to the survey. 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.

Next release: January 28, 2014

Texas Service Sector Outlook Survey

December 31, 2013
 

Click on links in the table for greater details. 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 Dec
Index
Nov
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Revenue
16.0
11.4
+4.6
Increasing
50
31.9
52.2
15.9
Employment
9.7
3.9
+5.8
Increasing
46
19.0
71.7
9.3
Part-time employment
6.1
4.4
+1.7
Increasing
2
11.7
82.7
5.6
0.9
-1.6
+2.5
Increasing
1
8.9
83.1
8.0
Wages and benefits
18.6
13.5
+5.1
Increasing
55
20.1
78.4
1.5
Input prices
30.5
27.4
+3.1
Increasing
56
32.9
64.7
2.4
Selling prices
10.9
7.2
+3.7
Increasing
37
16.8
77.3
5.9
Capital expenditures
16.9
11.6
+5.3
Increasing
52
22.5
71.9
5.6
General Business Conditions
Current (versus previous month)
Indicator Dec
Index
Nov
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
Company outlook
10.7
5.5
+5.2
Improving
27
18.9
72.9
8.2
General business activity
12.5
10.3
+2.2
Improving
26
22.0
68.5
9.5
Business Indicators Relating to Facilities and Products in Texas
Future (six months ahead)
Indicator Dec
Index
Nov
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Revenue
46.4
39.7
+6.7
Increasing
58
55.6
35.2
9.2
Employment
24.9
20.9
+4.0
Increasing
55
34.1
56.7
9.2
Part-time employment
13.9
10.3
+3.6
Increasing
18
19.6
74.7
5.7
7.0
-2.0
+9.0
Increasing
1
13.1
80.8
6.1
Wages and benefits
45.2
32.7
+12.5
Increasing
84
45.5
54.2
0.3
Input prices
50.8
45.2
+5.6
Increasing
84
52.2
46.4
1.4
Selling prices
29.4
26.3
+3.1
Increasing
56
34.6
60.2
5.2
Capital expenditures
34.2
23.0
+11.2
Increasing
57
40.0
54.3
5.8
General Business Conditions
Future (six months ahead)
Indicator Dec
Index
Nov
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
Company outlook
21.4
18.5
+2.9
Improving
28
31.1
59.2
9.7
General business activity
22.2
21.1
+1.1
Improving
27
31.3
59.6
9.1

*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.
Data have been seasonally adjusted as necessary.

Texas Retail Outlook Survey

December 31, 2013
 

Click on links in the table for greater details. Historical data are available from January 2007 to the most current release month.

Business Indicators Relating to Facilities and Products in Texas, Retail
Current (versus previous month)
Indicator Dec
Index
Nov
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Retail Activity in Texas
Sales
15.2
20.3
-5.1
Increasing
6
36.6
42.0
21.4
Employment
13.0
9.1
+3.9
Increasing
29
17.3
78.4
4.3
Part-time employment
9.6
0.0
+9.6
Increasing
1
15.4
78.8
5.8
Hours worked
3.0
-7.5
+10.5
Increasing
1
10.3
82.4
7.3
Wages and benefits
20.2
6.5
+13.7
Increasing
34
24.7
70.8
4.5
Input prices
21.2
16.9
+4.3
Increasing
54
31.5
58.2
10.3
Selling prices
21.6
3.5
+18.1
Increasing
17
30.3
61.0
8.7
Capital expenditures
19.3
13.3
+6.0
Increasing
2
22.8
73.7
3.5
Inventories
23.4
10.6
+12.8
Increasing
19
31.0
61.4
7.6
Companywide Retail Activity
Sales
22.1
26.6
-4.5
Increasing
31
36.0
50.1
13.9
Internet sales
4.8
0.0
+4.8
Increasing
1
14.3
76.2
9.5
Catalog sales
0.0
-5.4
+5.4
No Change
1
7.9
84.2
7.9
General Business Conditions, Retail
Current (versus previous month)
Indicator Dec
Index
Nov
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
Company outlook
24.7
17.6
+7.1
Improving
8
28.9
66.9
4.2
General business activity
12.6
14.6
-2.0
Improving
8
23.7
65.2
11.1
Business Indicators Relating to Facilities and Products in Texas, Retail
Future (six months ahead)
Indicator Dec
Index
Nov
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Retail Activity in Texas
Sales
52.6
54.4
-1.8
Increasing
58
58.5
35.6
5.9
Employment
31.4
24.1
+7.3
Increasing
48
35.0
61.4
3.6
Part-time employment
10.1
8.3
+1.8
Increasing
6
15.8
78.5
5.7
Hours worked
7.5
2.2
+5.3
Increasing
7
12.9
81.7
5.4
Wages and benefits
38.5
32.5
+6.0
Increasing
60
40.4
57.8
1.9
Input prices
40.7
27.5
+13.2
Increasing
56
44.4
51.9
3.7
Selling prices
38.9
36.0
+2.9
Increasing
56
42.6
53.7
3.7
Capital expenditures
27.8
21.6
+6.2
Increasing
33
31.5
64.8
3.7
Inventories
18.5
28.4
-9.9
Increasing
49
32.3
53.9
13.8
Companywide Retail Activity
Sales
54.2
55.6
-1.4
Increasing
57
54.4
45.4
0.2
Internet sales
25.0
27.0
-2.0
Increasing
57
27.5
70.0
2.5
Catalog sales
7.9
10.5
-2.6
Increasing
2
11.9
84.1
4.0
General Business Conditions, Retail
Future (six months ahead)
Indicator Dec
Index
Nov
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
Company outlook
33.5
32.7
+0.8
Improving
56
36.8
59.9
3.3
General business activity
24.4
31.7
-7.3
Improving
27
32.2
60.0
7.8

*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.
Data have been seasonally adjusted as necessary.

Texas Service Sector Outlook Survey

December 31, 2013

TSSOS Chart

Downloadable TSSOS chart: Low-res (72 dpi) | Hi-res (300 dpi)

 

Texas Retail Outlook Survey

December 31, 2013

TSSOS Chart

Downloadable TROS chart: Low-res (72 dpi) | Hi-res (300 dpi)

Texas Service Sector Outlook Survey

December 31, 2013

Comments from Survey Respondents

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

Credit Intermediation and Related Services

  • Direct consumer loan demand is steadily increasing, and it appears that this trend will continue. Small business lending has been steady. Mortgage activity has definitely slowed and is projected to remain tepid through the first quarter 2014. Now that tapering has been initiated, we anticipate a slow, but steady, increase in funding costs beginning midyear.

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

  • We still have an unsettling business climate and the same issues that are not resolved, e.g. health insurance, federal regulations and immigration.

Real Estate

  • We are somewhat anxious about the scheduled January implementation of the Ability to Repay (ATR) and Qualified Mortgage (QM) provisions of the Dodd–Frank Act for the mortgage loan industry. Information concerning the impact on sales activity has been mixed, with the negative impact to the market ranging from a minimum of 5 to 10 percent to a maximum of 25 to 30 percent. We're taking the position of no change in our future outlook until we see how these new provisions shake out in the marketplace despite other market factors being positive overall.
  • We feel as though we may have reached a point in the business cycle where revenue growth is beginning to flatten with costs continuing to increase. First quarter 2014 will be an important indicator of where we are in the current cycle.

Rental and Leasing Services

  • December is typically a good month due to depreciation and tax planning. With the repeal of bonus depreciation, we expect a good December due to losing the last great opportunity to defer taxes. However, so far through Dec. 16, that has not materialized. We think next year is going to be bad.

Professional, Scientific, and Technical Services

  • Commercial real estate construction continues to rise in the region and looks to hold steady through 2014, driven primarily by the energy sector. The Affordable Care Act has had no effect on our business or our future outlook, although rumors are for health care premiums to go up 25 to 40 percent next year.
  • Business is still in the wait and see mode.
  • The real estate industry remained strong throughout 2013, and the general consensus of the market is more of the same for 2014. Our company surpassed its all-time record in gross revenues in 2013 with a 6 percent reduction in staff. This speaks volumes for what technology has done for our industry and raises the question of what the true full-employment number really should be.

Management of Companies and Enterprises

  • Too many regulations are hurting our business and our customers. Everyone is complaining.
  • The Affordable Care Act is having a large impact on many of our customers who are dropping their coverage entirely. This in turn is impacting the employees of these companies. Business has absolutely no idea of what is in front of them on the regulatory front.

Administrative and Support Services

  • Customers are still very tight on expenses. Any price increases are met with a negative outlook from the customer. Our vendors are raising costs in some areas but not across the board. Pressure is still on our customers to validate all expenses.

Ambulatory Health Care Services

  • The vast majority of our patients are elderly and on Medicare, so we don't expect to see much impact from the Affordable Care Act. We continue to seek alternative revenue flows as Medicare continues to cut our reimbursement.

Nursing and Residential Care Facilities

  • Our company health insurance policy is being canceled as it is not compliant with the Affordable Care Act. The proposed new insurance rates are 35 percent higher with increased deductibles. This is our biggest business concern this month.
  • There is continued uncertainty about federal budget deficit and the implementation of the Affordable Care Act. This could potentially be very disruptive to the health care marketplace.

Social Assistance

  • We had a drop in retail store sales due to weather.

Food Services and Drinking Places

  • Bad weather will be the cause for a very disappointing December.
  • Our normal seasonal pattern called for sales to increase sharply early last week, but through Friday we were down sharply. Then on Saturday and Sunday, we broke out with very good sales that are actually substantially better than last year. We are still down for the holiday surge period but by very little, and there is no reason to expect that sales will drop back down again from here through the first of the year when the normal seasonal trend calls for a sharp drop in sales. Hopefully, by the end of the month we will actually be ahead of last year. We are optimistic that things are getting better and, in the six-month horizon, expect to have better sales compared with last year, which is why we are expecting increases in revenue and employee count. We will also be working to shift to more part-time employees. Cost of goods has actually declined a tenth or two over the last couple of months, and we are shifting to a more optimistic viewpoint that costs will be fairly stable going forward for some time. We took a small—approximately 1 percent—price increase early in December, which will probably be the last price action we take this fiscal year.
  • The increase in business will come from new locations we are opening. We aren't expecting much of an increase in same store sales. We will be taking a small price increase in early 2014, and some of our vendors are doing the same.

Merchant Wholesalers, Durable Goods

  • Business is good despite the weather-related delays. December should close pretty strong. Barring weather issues in first quarter, we should do well. The economic indicators we follow point to continuing growth in the first half of 2014 with a slowing trend in the last half; we believe that.
  • We have good moisture now and an improved outlook. If tax incentives are not extended and go away, future sales will be hurt very much.
  • All of the increases six months from now are expected to be mostly seasonal in nature. Exceptions include sales increases, which are also due to the capture of market share and a slight growth in the overall market, and wage increases, which are normal annual increases.

Merchant Wholesalers, Durable Goods

  • Feed prices to farmers and ranchers are sharply lower than last year. The cost of doing business is higher, but raw ingredient costs are lower.

Motor Vehicle and Parts Dealers

  • The ice storm really hurt business.
  • We continue to be impacted by our chief franchisor’s issues.

 

Texas Service Sector Outlook Survey

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 excel   Unadjusted excel
Seasonally adjusted excel   Seasonally adjusted excel

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 excel   Unadjusted excel
Seasonally adjusted excel   Seasonally adjusted excel

Questions regarding the Texas Service Sector Outlook Survey can be addressed to Amy Jordan at amy.jordan@dal.frb.org.

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