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Texas Service Sector Outlook Survey

Report in PDF
July 29, 2014

Texas Service Sector Activity Strengthens Further and Business Conditions Improve

Texas service sector activity climbed in July, according to business executives responding to the Texas Service Sector Outlook Survey. The revenue index, a key measure of state service sector conditions, rose from 16.9 to 21.5, its highest level since February 2012.

Labor market indicators suggested continued positive, but somewhat slower, growth. The employment index remained positive but plunged 12 points to 4.6 in July, indicating employment rose at a slower pace than in June. The hours worked index fell from 7.3 to 3.9.

Perceptions of broader economic conditions reflected more optimism in July, rising to multiyear highs. The general business activity index edged up from 21.1 to 22.4, reaching its all-time high. The company outlook index moved up from 17 to 21.6, its highest reading since February 2012, with 26 percent of respondents reporting that their outlook improved from last month and 4 percent noting it worsened.

Price and wage pressures increased this month. The selling prices index was unchanged at 11.7, indicating prices increased at the same pace as in June. The wages and benefits index held steady at 20.3, suggesting labor costs increased at the same pace as last month, although the great majority of firms continued to note no change in compensation costs.

Respondents’ expectations regarding future business conditions reflected more optimism in July. The index of future general business activity rose from 28.7 to 34.2. The index of future company outlook jumped 11 points to 40.3. Indexes of future service sector activity, such as future revenue and employment, also reflected more optimism this month.

Texas Retail Outlook Survey

July 29, 2014 

Retail Activity Strengthens

Retail Activity Strengthens

Retail sales grew in July, according to business executives responding to the Texas Retail Outlook Survey. The sales index rose from 16 to 22, reaching its highest level in eight months. Inventories increased at a faster pace than last month.

Labor market indicators were mixed this month. The employment index fell sharply from 19.5 to 0, indicating retail jobs were unchanged in July. The hours worked index remained positive but dipped from 4.5 to 2.1, suggesting a smaller increase in hours worked per week, although the great majority of firms continued to note no change.

Retailers’ perceptions of broader economic conditions reflected less optimism in July. The general business activity index dropped 9 points to 21.3. The company outlook index fell slightly from 30.3 to 27.1, with 27 percent of respondents noting an improved company outlook over the prior month, compared with less than 1 percent reporting their outlook had worsened.

Retail price and wage pressures increased this month. The selling prices index inched up from 17.8 to 19.4. The wages and benefits index advanced from 14.3 to 23.4, although the great majority of firms noted no change in labor costs.

Retailers’ perceptions of future broader economic conditions reflected more optimism in July. The future general business activity index ticked up from 32.7 to 35.4. The index of future company outlook rose from 35.8 to 41.5. Indexes of future retail sector activity also reflected more optimism 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 July 15–23, and 242 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: August 26, 2014

Texas Service Sector Outlook Survey

July 29, 2014
 

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 Jul
Index
Jun
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Revenue
21.5
16.9
+4.6
Increasing
57
35.6
50.3
14.1
Employment
4.6
16.5
-11.9
Increasing
53
17.3
70.0
12.7
Part-time employment
7.5
6.1
+1.4
Increasing
9
13.0
81.5
5.5
3.9
7.3
-3.4
Increasing
6
9.6
84.7
5.7
Wages and benefits
20.3
20.8
-0.5
Increasing
62
22.3
75.7
2.0
Input prices
23.3
24.0
-0.7
Increasing
63
25.6
72.1
2.3
Selling prices
11.7
11.7
0.0
Increasing
44
15.5
80.7
3.8
Capital expenditures
13.2
14.1
-0.9
Increasing
59
20.7
71.8
7.5
General Business Conditions
Current (versus previous month)
Indicator Jul
Index
Jun
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
Company outlook
21.6
17.0
+4.6
Improving
35
25.8
70.0
4.2
General business activity
22.4
21.1
+1.3
Improving
33
27.3
67.8
4.9
Business Indicators Relating to Facilities and Products in Texas
Future (six months ahead)
Indicator Jul
Index
Jun
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Revenue
54.3
50.6
+3.7
Increasing
65
59.3
35.7
5.0
Employment
39.7
34.5
+5.2
Increasing
64
43.0
53.7
3.3
Part-time employment
19.0
13.4
+5.6
Increasing
25
23.5
72.0
4.5
11.2
8.4
+2.8
Increasing
8
14.2
82.8
3.0
Wages and benefits
43.5
42.9
+0.6
Increasing
91
44.4
54.7
0.9
Input prices
49.9
46.5
+3.4
Increasing
91
52.1
45.7
2.2
Selling prices
27.5
28.8
-1.3
Increasing
63
33.8
59.9
6.3
Capital expenditures
32.7
32.3
+0.4
Increasing
64
37.9
56.9
5.2
General Business Conditions
Future (six months ahead)
Indicator Jul
Index
Jun
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
Company outlook
40.3
29.1
+11.2
Improving
35
44.1
52.1
3.8
General business activity
34.2
28.7
+5.5
Improving
34
37.5
59.2
3.3

*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

July 29, 2014
 

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 Jul
Index
Jun
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Retail Activity in Texas
Sales
22.0
16.0
+6.0
Increasing
13
36.7
48.5
14.7
Employment
0.0
19.5
-19.5
No Change
1
9.4
81.2
9.4
Part-time employment
-1.9
1.8
-3.7
Decreasing
1
7.5
83.0
9.4
Hours worked
2.1
4.5
-2.4
Increasing
2
8.5
85.1
6.4
Wages and benefits
23.4
14.3
+9.1
Increasing
41
26.7
70.0
3.3
Input prices
20.2
13.2
+7.0
Increasing
48
23.4
73.4
3.2
Selling prices
19.4
17.8
+1.6
Increasing
24
25.3
68.8
5.9
Capital expenditures
12.5
3.6
+8.9
Increasing
9
19.6
73.2
7.1
Inventories
23.4
16.1
+7.3
Increasing
30
34.8
53.8
11.4
Companywide Retail Activity
Sales
28.1
20.0
+8.1
Increasing
38
40.5
47.1
12.4
Internet sales
16.2
5.0
+11.2
Increasing
6
16.2
83.8
0.0
Catalog sales
12.1
0.0
+12.1
Increasing
1
12.1
87.9
0.0
General Business Conditions, Retail
Current (versus previous month)
Indicator Jul
Index
Jun
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
Company outlook
27.1
30.3
-3.2
Improving
15
27.4
72.3
0.3
General business activity
21.3
30.3
-9.0
Improving
15
24.5
72.3
3.2
Business Indicators Relating to Facilities and Products in Texas, Retail
Future (six months ahead)
Indicator Jul
Index
Jun
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Retail Activity in Texas
Sales
47.7
42.9
+4.8
Increasing
65
53.3
41.1
5.6
Employment
26.7
26.3
+0.4
Increasing
55
31.9
62.9
5.2
Part-time employment
9.5
2.0
+7.5
Increasing
13
18.3
72.9
8.8
Hours worked
11.1
4.2
+6.9
Increasing
28
14.1
82.9
3.0
Wages and benefits
39.8
40.7
-0.9
Increasing
67
42.8
54.2
3.0
Input prices
38.9
37.7
+1.2
Increasing
63
42.6
53.7
3.7
Selling prices
35.1
39.6
-4.5
Increasing
63
40.7
53.7
5.6
Capital expenditures
29.6
24.6
+5.0
Increasing
40
33.3
63.0
3.7
Inventories
33.1
25.0
+8.1
Increasing
56
42.6
47.9
9.5
Companywide Retail Activity
Sales
49.9
38.7
+11.2
Increasing
64
52.2
45.5
2.3
Internet sales
26.5
34.2
-7.7
Increasing
64
29.4
67.6
2.9
Catalog sales
19.9
7.6
+12.3
Increasing
9
20.1
79.7
0.2
General Business Conditions, Retail
Future (six months ahead)
Indicator Jul
Index
Jun
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
Company outlook
41.5
35.8
+5.7
Improving
64
42.1
57.3
0.6
General business activity
35.4
32.7
+2.7
Improving
34
36.0
63.4
0.6

*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

July 29, 2014

TSSOS Chart

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

 

Texas Retail Outlook Survey

July 29, 2014

TSSOS Chart

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

Texas Service Sector Outlook Survey

July 29, 2014

Comments from Survey Respondents

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

Credit Intermediation and Related Activities

  • We are beginning to see some increases in loan demand. This far out in the country there is compensatory delay to improvements in the banking industry. This lag in opportunity is offset by diversifying into bigger market places, but that is very competitive and requires strong relational contact to avoid taking greater risk. The biggest challenge is adapting to the accelerated regulatory environment. Other than the fact it is hot and we need a rain, all is well. Goats and cows are selling at record highs.
  • Capital expenses and employee increases are related to our new facility opening in September.

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

  • Commodities are a strong base. Slower employment growth has slowed home construction.
  • Business is very competitive. We are concerned about the significant increase in federal income taxes due to the nonrenewal of the Section 179 expenditures, i.e., capital items that are expensed for tax purposes. Bonus depreciation and a couple of other items are also in this category. These are a significant amount of our capital expenditure program. We have cut back to only the essential capital expenditures—for example, maintenance—to offset the increase in taxes. These federal code sections have been renewed on an annual basis for several years; however, they have not been renewed for the current year.

Rental and Leasing Services

  • If bonus depreciation is not approved, it will be too costly to grow our business.

Professional, Scientific and Technical Services

  • The Texas business environment is good for now. We continue to be concerned about macroeconomic factors, especially those of a global nature. We are cautiously optimistic that current favorable trends will continue through Q3.
  • The real estate market continued on its brisk pace in June, and from what we are hearing in the market place, this trend will continue through the end of the year. The number of cranes in the sky is reminiscent of the late 80s, but this time around it is being fueled by demand instead of speculation. It is hard to get a feel for where we are in this cycle, but the number of people moving into the DFW area continues to fuel development both residentially and commercially.
  • We are seeing strong demand. We are picking and choosing between opportunities rather than taking everything that comes in the door. We are concerned about being able to get enough good people, but surprisingly we have not been losing associates.

Management of Companies and Enterprises

  • Regulatory mandates, costs and overreach continue to be the biggest hurdles for our business and that of our customers. About 15 to 20 percent of this company's earnings are going out on regulatory matters, and regulatory costs continue to escalate. Many of our customers continue to hold cash on the sidelines, uncertain of what to do because they cannot anticipate the future regulations being considered for their industry.
  • South Texas appears to be entering a mature stage of the Eagle Ford Shale boom.
  • Too much government regulation is hurting our ability to help customers.

Administrative and Support Services

  • We have a broad customer base spanning industrial, retail, office, restaurant and multifamily businesses. There are mixed signals coming from office, multifamily and retail, trending to a negative outlook as consumers cut back, and office and multifamily are seeing more competition from new construction. Overall most groups are being cautious on expenses, while vendors are raising our costs on products. Our sales are up as we acquire more new customers, not as a result of price increases for our products and services.
  • The Affordable Care Act is affecting our clients and our company because of the uncertainty and complexity. The ever-changing rules and the lack of policies to fit our industry are a big problem.
  • Interest rates continue to be an economic factor that will impact our ability to grow. Inflationary pressures are as high as we have witnessed in the last six years. While there may be a high unemployment rate, our ability to find good help with sound work ethic is a real challenge.

Ambulatory Health Care Services

  • It has been a quiet summer, but our medical practice has remained very busy. Proposed Medicare reductions on specific billing codes will impact ophthalmology beginning in January 2015, reducing revenue.
  • Summer is generally slower for health care, as both physicians and patients go on vacation. We generally see lower revenues. However, in anticipation of growth starting in the fall, we expect to see our costs rise in the short term as we increase staff.

Hospitals

  • Rural hospitals continue to get squeezed. Maintaining independence will be difficult in the health care environment.

Nursing and Residential Care Facilities

  • Government regulation and bureaucracy have had a negative impact upon our business in the second and third quarters, costing us hundreds of thousands of dollars a month.

Food Services and Drinking Places

  • Our business mirrors the consumer confidence index.
  • We opened a new unit and, for reasons we have not been able to identify, our sales across the board in all three restaurant concepts we now operate took a sharp turn up. Our new restaurant opened sharply higher than we expected, while sales in our core concept restaurants increased 3.5 percent, which is greater than our 2.3 percent price increase. Our third concept restaurants moved from double-digits down to double-digits up. The increase in employees both now and in the six-month horizon is because of the new unit. We still see little pressure on wages. We expect increases in employee benefits, particularly health care, in our annual renewal in January. Cost of goods has continued to be quite stable, but we don't expect that to continue. We just took a price increase in May, so we have no plans to raise prices again in the next six months. Our positive outlook on business conditions for our company and the general economy are mostly driven by the sudden increase in sales. We definitely recognize that it is far too soon to assume the uptrend will continue.
  • The cost of protein, including beef, poultry and pork, has skyrocketed. The labor market has tightened too.
  • The impact of new and continuing government regulations is having a very negative effect on small businesses like ours. Our inability to plan very far ahead is becoming a problem. Taxes are excessive, impacting employees as well as owners and obstructing the growth of our business.

Merchant Wholesalers, Durable Goods

  • Our decreases are seasonal changes.

Motor Vehicle and Parts Dealers

  • Business levels are up overall.

Building Material and Garden Equipment and Supplies Dealers

  • The last six months have been some of the best when compared with the last four to five years. Business is steady, and margins are holding. It is a nice change; we just hope it continues.
  • Things are slowing down a little, but business is still good and we think it will remain stable. There have been a few bumps in the road but no drastic drops. We think some volatility is due to the Affordable Care Act, and we are worried about a potentially large cost the first of year and how to pay for it.

Food and Beverage Stores

  • We have seen a lot of new retail competition chasing the strong growth in population. We continue to feel margin pressure on gross profit.

 

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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