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Texas Service Sector Outlook Survey

Report in PDF
November 25, 2014

Texas Service Sector Activity Picks Up

What's New This Month

For this month’s survey, Texas business executives were asked supplemental questions on employment expectations and the labor market. Results for these questions from the Texas Manufacturing Outlook Survey (TMOS), Texas Service Sector Outlook Survey (TSSOS) and Texas Retail Outlook Survey (TROS) have been released together. Read Special Questions results.

Texas service sector activity improved notably in November, according to business executives responding to the Texas Service Sector Outlook Survey. The revenue index, a key measure of state service sector conditions, surged from 14 to 25.4.

Labor market indicators reflected slightly faster employment growth and longer workweeks. The employment index moved up from 12.3 to 15.3 in November. The hours worked index was largely unchanged at 4.4 this month.

Perceptions of broader economic conditions continued to reflected optimism in November. The general business activity index held steady at 17.3. The company outlook index edged up from 15.9 to 17, with 22 percent of respondents reporting that their outlook improved from last month and 5 percent noting it worsened.

Price pressures increased while wage pressures held steady this month. The selling prices index rose slightly from 6.6 to 9.3, indicating prices increased at a slightly faster pace than in October. The wages and benefits index held steady at 17.6, 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 November. The index of future general business activity advanced almost 10 points to 33.1. The index of future company outlook ticked up from 29 to 31.1. Indexes of future service sector activity, such as future revenue and employment, also reflected more optimism this month.

Texas Retail Outlook Survey

November 25, 2014 

Retail Sales Continue to Grow

Retail Sales Continue to Grow

Retail sales continued to reflect expansion in November, according to business executives responding to the Texas Retail Outlook Survey. The sales index was unchanged at 16.7, suggesting sales grew at the same pace as last month. Inventories increased at a faster pace than last month.

Labor market indicators were mixed. The employment index advanced 8 points to 10.9, indicating retail jobs increased at a faster pace than in October. The hours worked index fell slightly from -1.3 to -2.9, suggesting shorter workweeks, although the great majority of firms continued to note no change.

Retailers’ perceptions of broader economic conditions reflected less optimism in November. The general business activity index dipped 3 points to 26.7. The company outlook index ticked down from 26.8 to 25.1, 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 this month. The selling prices index rose slightly from 13 to 15.4. The wages and benefits index moved up from 11.6 to 14.8, although the great majority of firms noted no change in labor costs.

Retailers’ perceptions of future broader economic conditions reflected more optimism in November. The future general business activity index rose from 33.9 to 41.3, reaching an all-time high. The index of future company outlook advanced from 34.9 to 42.6, its highest reading in almost four years. 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 Nov. 10–19, and 247 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: December 30, 2014

Texas Service Sector Outlook Survey

November 25, 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 Nov
Index
Oct
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Revenue
25.4
14.0
+11.4
Increasing
61
35.4
54.6
10.0
Employment
15.3
12.3
+3.0
Increasing
57
20.1
75.1
4.8
Part-time employment
5.7
6.3
-0.6
Increasing
13
10.1
85.5
4.4
4.4
4.1
+0.3
Increasing
10
9.4
85.6
5.0
Wages and benefits
17.6
18.0
-0.4
Increasing
66
18.9
79.8
1.3
Input prices
25.3
22.9
+2.4
Increasing
67
28.7
67.9
3.4
Selling prices
9.3
6.6
+2.7
Increasing
48
14.0
81.3
4.7
Capital expenditures
9.9
11.1
-1.2
Increasing
63
16.0
77.9
6.1
General Business Conditions
Current (versus previous month)
Indicator Nov
Index
Oct
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
Company outlook
17.0
15.9
+1.1
Improving
39
22.2
72.6
5.2
General business activity
17.3
18.0
-0.7
Improving
37
22.9
71.5
5.6
Business Indicators Relating to Facilities and Products in Texas
Future (six months ahead)
Indicator Nov
Index
Oct
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Revenue
49.4
47.6
+1.8
Increasing
69
56.3
36.8
6.9
Employment
42.6
33.0
+9.6
Increasing
68
44.0
54.6
1.4
Part-time employment
13.1
13.7
-0.6
Increasing
29
18.1
76.9
5.0
5.1
5.6
-0.5
Increasing
12
9.9
85.3
4.8
Wages and benefits
44.1
41.5
+2.6
Increasing
95
44.5
55.1
0.4
Input prices
47.4
45.5
+1.9
Increasing
95
50.3
46.9
2.9
Selling prices
30.8
29.0
+1.8
Increasing
67
36.6
57.6
5.8
Capital expenditures
31.3
29.9
+1.4
Increasing
68
38.1
55.1
6.8
General Business Conditions
Future (six months ahead)
Indicator Nov
Index
Oct
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
Company outlook
31.1
29.0
+2.1
Improving
39
38.3
54.5
7.2
General business activity
33.1
23.4
+9.7
Improving
38
37.9
57.3
4.8

*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 Retail Outlook Survey

November 25, 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 Nov
Index
Oct
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Retail Activity in Texas
Sales
16.7
16.7
0.0
Increasing
17
34.3
48.1
17.6
Employment
10.9
2.9
+8.0
Increasing
4
18.0
74.9
7.1
Part-time employment
-1.8
3.5
-5.3
Decreasing
1
10.9
76.4
12.7
Hours worked
-2.9
-1.3
-1.6
Decreasing
2
9.5
78.1
12.4
Wages and benefits
14.8
11.6
+3.2
Increasing
45
20.3
74.2
5.5
Input prices
22.4
13.1
+9.3
Increasing
52
25.9
70.6
3.5
Selling prices
15.4
13.0
+2.4
Increasing
28
22.3
70.8
6.9
Capital expenditures
8.7
6.8
+1.9
Increasing
13
14.0
80.7
5.3
Inventories
19.0
15.1
+3.9
Increasing
34
27.1
64.8
8.1
Companywide Retail Activity
Sales
17.3
15.8
+1.5
Increasing
42
31.9
53.5
14.6
Internet sales
0.0
11.7
-11.7
No Change
1
7.1
85.7
7.1
Catalog sales
-2.6
0.0
-2.6
Decreasing
1
5.3
86.8
7.9
General Business Conditions, Retail
Current (versus previous month)
Indicator Nov
Index
Oct
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
Company outlook
25.1
26.8
-1.7
Improving
19
28.7
67.7
3.6
General business activity
26.7
29.8
-3.1
Improving
19
29.7
67.3
3.0
Business Indicators Relating to Facilities and Products in Texas, Retail
Future (six months ahead)
Indicator Nov
Index
Oct
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Retail Activity in Texas
Sales
54.2
56.3
-2.1
Increasing
69
61.4
31.4
7.2
Employment
32.9
27.1
+5.8
Increasing
59
37.1
58.7
4.2
Part-time employment
4.6
10.7
-6.1
Increasing
17
18.6
67.4
14.0
Hours worked
6.5
8.5
-2.0
Increasing
32
13.5
79.5
7.0
Wages and benefits
39.8
39.1
+0.7
Increasing
71
42.1
55.6
2.3
Input prices
35.8
31.6
+4.2
Increasing
67
42.9
50.0
7.1
Selling prices
39.3
38.6
+0.7
Increasing
67
46.4
46.4
7.1
Capital expenditures
35.8
25.0
+10.8
Increasing
44
42.9
50.0
7.1
Inventories
25.9
20.9
+5.0
Increasing
60
37.6
50.7
11.7
Companywide Retail Activity
Sales
46.8
47.9
-1.1
Increasing
68
48.9
49.1
2.1
Internet sales
29.3
26.2
+3.1
Increasing
68
29.3
70.7
0.0
Catalog sales
11.0
7.6
+3.4
Increasing
13
14.5
82.0
3.5
General Business Conditions, Retail
Future (six months ahead)
Indicator Nov
Index
Oct
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
Company outlook
42.6
34.9
+7.7
Improving
68
48.0
46.5
5.4
General business activity
41.3
33.9
+7.4
Improving
38
46.3
48.6
5.0

*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

November 25, 2014

TSSOS Chart

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

 

Texas Retail Outlook Survey

November 25, 2014

TSSOS Chart

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

Texas Service Sector Outlook Survey

November 25, 2014

Comments from Survey Respondents

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

Credit Intermediation and Related Activities

  • There is some concern about oil prices and the impact they have on multiple ancillary industries. Livestock prices remain at historical highs and will for several years, especially if the drought is on the way out of Texas.

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

  • We continue to see increases in regulations and taxes, particularly from the expiration of the capital expenditures and bonus depreciation tax incentives. This is a significant tax increase for our businesses, which means no expansion of facilities or capabilities in the manufacturing process. We continue to monitor these; plus, illegal immigration and local taxes are becoming somewhat of a problem. These things are beginning to really hurt the bottom line.
  • Slower job growth is hurting retail sales. Lower prices for oil and other commodities hurt future prospects.

Publishing Industries (except Internet)

  • Our average employee workweek for November includes significant overtime.

Rental and Leasing Services

  • We think if bonus depreciation passes now, it will help escalate sales and revenue through the end of the year and into next year. If it does not pass, we think sales and revenue will slowly sink back in the sand.

Professional, Scientific and Technical Services

  • In addition to the upcoming Affordable Care Act employer mandate, we are having numerous issues with prevailing wage law as it relates to our H2-B visa employees. Essentially, we are being required to increase our H2-B wages by more than 20 percent, causing our outlook for the future to be somewhat bleak. We entered into contracts months ago at the currently approved rates, but the methodology has changed midstream. These are exactly the types of issues that drive businesses crazy.
  • The real estate market in Texas is still on fire. No one could have forecast that interest rates would remain at such low levels, and everyone is doing their best to take advantage of it. With the level of business activity, we feel confident that this market still has a long way to go, but we are trying to remain cautious about staffing needs due to the unknown of what is going to happen once these rates begin to move up.
  • The low price of oil does not help.

Management of Companies and Enterprises

  • Regulatory burden is beginning to erode earnings.

Administrative and Support Services

  • We service many business lines and industries. We are seeing weakness in the restaurant sector. The real estate sector is mixed, with properties changing hands and new owners trying to adjust to a higher cost basis, while existing owners have increased budgets for service. Industrial and manufacturing are showing improvement but are keeping tight reins on costs.
  • Health insurance rates are unbelievable. We will not be able to afford them.
  • There is still a very pronounced lack of urgency in full-time hiring. IT professionals are receiving multiple offers, making it an employee market, but hiring managers remain tentative about deciding.

Educational Services

  • There was a slight increase in full-time employees due to concentrated recruiting efforts to fill vacant instructor positions as well as job fairs to recruit adjunct part-time instructors for the spring 2015 semester.

Ambulatory Health Care Services

  • We are expecting an increase in benefit costs but no wage increases. Revenue will decline as Medicare reduces some fees paid to physicians.
  • Since we are a health care provider, decreasing reimbursement is forcing us to focus on increasing productivity of our staff in order to absorb lower revenue per patient. The bottom line is that small- and medium-sized health care businesses are trying to stay ahead of the slope of decreasing reimbursement even as increased accountability on quality and outcomes is adding cost because additional qualified staff is required.

Food Services and Drinking Places

  • Sales have slowed slightly, but they are still at levels reflecting a very substantial increase over last year, even after adjusting for price increases. Other factors have remained almost exactly the same compared with last period. We are expecting continued improvement in sales in the next six months. We still don't see much in the way of pressure to increase wages, but we are about at the point where the increased sales are going to start requiring a longer employee workweek. However, the biggest factor in our projected increases in wages and benefits is benefits. Last year we offered medical benefits to a little over 150 people, and this year we are required to offer benefits to more than 500 people. Additionally, our existing policy ended up being almost 20 percent more expensive. We expect the signup rate among the newly eligible group to be somewhere in the 10 to 15 percent range. We are already being advised that there will be major increases for almost all of our key input products at the beginning of the year. We are planning to take a price increase later this month because of the expected increases in the cost of employee medical insurance.
  • Our costs continue to increase and there is no relief is in sight. The price of protein—beef and chicken—is at record levels. We are starting high school aged workers at $10 an hour. Every increase in our menu items is greeted with complaints and loss of customer count.

Merchant Wholesalers, Durable Goods

  • Business slowed some this quarter. We expect to see some nice increases next year.
  • Long-term agricultural commodity prices are weak.

Motor Vehicle and Parts Dealers

  • We continue to be impacted by the problems with our chief supplier.

Food and Beverage Stores

  • Total sales are down because of the decline in retail fuel prices. Volumes and profits are up. Lower fuel prices are driving improved grocery sales, which is a big plus.

 

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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