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Texas Service Sector Outlook Survey

Report in PDF
February 24, 2015

Texas Service Sector Activity Continues to Expand and Business Conditions Improve Slightly

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 continued to reflect expansion in February, according to business executives responding to the Texas Service Sector Outlook Survey. The revenue index, a key measure of state service sector conditions, edged up from 12.1 to 13.6 but remained below its 2014 average.

Labor market indicators reflected faster employment growth and slightly longer workweeks. The employment index rose from 5.8 to 12 in February, indicating hiring picked up pace this month. The hours worked index was unchanged at 1.4 this month, suggesting work hours increased at the same pace as in January.

Perceptions of broader economic conditions reflected slightly more optimism in February. The general business activity index rebounded from a negative reading last month to 1.7. The company outlook index moved up from 0.3 to 3.5, with 18 percent of respondents reporting that their outlook improved from last month and 14 percent noting that it worsened.

Price and wage pressures increased slightly this month. The selling prices index ticked up a point to 3.9. The wages and benefits index rose slightly from 13.5 to 15.4, although the great majority of firms continued to note no change in compensation costs.

Respondents’ expectations regarding future business conditions reflected more optimism in February. The index of future general business activity edged up from 6.1 to 8.9. The index of future company outlook rose from 8.8 to 14.3. Indexes of future service sector activity, such as future revenue and employment, remained in solid positive territory this month.

Texas Retail Outlook Survey

February 24, 2015 

Retail Sales Expand but at a Slower Pace

Retail Sales Expand but at a Slower Pace

Retail sales increased at a slower pace in February, according to business executives responding to the Texas Retail Outlook Survey. The sales index remained positive but dipped from 10.6 to 6.8. Inventories increased.

Labor market indicators were mixed in February. The employment index rebounded from a negative reading last month to 1.8, indicating retail jobs increased slightly this month. The hours worked index edged down 3 points to -0.1, suggesting workweek length was unchanged from January.

Retailers’ perceptions of broader economic conditions were mixed this month. The general business activity index fell 3 points to -2.2, its lowest reading since April 2013. After a negative reading last month, the company outlook index moved back into positive territory to 3.1, with 20 percent of respondents noting an improved company outlook over the prior month, compared with 17 percent reporting their outlook had worsened.

Retail prices rose, while wage pressures eased this month. The selling prices index advanced back into positive territory in February with a reading of 1.9. The wages and benefits index declined from 12.9 to 6.6, although the great majority of firms noted no change in labor costs.

Retailers’ perceptions of future broader economic conditions continued to reflect optimism in February. The index of future general business activity dropped from 12.1 to 2.3. The index of future company outlook ticked up from 11.3 to 12.9. Indexes of future retail sector activity were mixed 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 Feb. 10–18, and 244 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: March 31, 2015

Texas Service Sector Outlook Survey

February 24, 2015
 

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 Feb
Index
Jan
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Revenue
13.6
12.1
+1.5
Increasing
64
30.3
53.0
16.7
Employment
12.0
5.8
+6.2
Increasing
60
19.4
73.2
7.4
Part-time employment
5.9
1.0
+4.9
Increasing
16
13.1
79.7
7.2
1.4
1.3
+0.1
Increasing
15
9.7
81.9
8.3
Wages and benefits
15.4
13.5
+1.9
Increasing
65
18.4
78.6
3.0
Input prices
18.9
11.4
+7.5
Increasing
70
24.8
69.3
5.9
Selling prices
3.9
2.8
+1.1
Increasing
51
12.9
78.1
9.0
Capital expenditures
7.0
7.5
-0.5
Increasing
66
15.7
75.6
8.7
General Business Conditions
Current (versus previous month)
Indicator Feb
Index
Jan
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
Company outlook
3.5
0.3
+3.2
Improving
31
17.7
68.1
14.2
General business activity
1.7
-2.8
+4.5
Improving
1
16.5
68.7
14.8
Business Indicators Relating to Facilities and Products in Texas
Future (six months ahead)
Indicator Feb
Index
Jan
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Revenue
38.3
33.6
+4.7
Increasing
72
52.3
33.7
14.0
Employment
21.7
24.8
-3.1
Increasing
71
35.6
50.4
13.9
Part-time employment
10.3
9.0
+1.3
Increasing
32
19.6
71.1
9.3
3.7
5.1
-1.4
Increasing
15
13.5
76.7
9.8
Wages and benefits
37.2
43.3
-6.1
Increasing
98
41.8
53.6
4.6
Input prices
40.5
38.2
+2.3
Increasing
98
45.3
49.9
4.8
Selling prices
19.3
25.6
-6.3
Increasing
70
29.1
61.1
9.8
Capital expenditures
18.7
22.2
-3.5
Increasing
71
29.5
59.7
10.8
General Business Conditions
Future (six months ahead)
Indicator Feb
Index
Jan
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
Company outlook
14.3
8.8
+5.5
Improving
42
30.5
53.3
16.2
General business activity
8.9
6.1
+2.8
Improving
41
25.6
57.7
16.7

*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

February 24, 2015
 

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 Feb
Index
Jan
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Retail Activity in Texas
Sales
6.8
10.6
-3.8
Increasing
20
27.0
52.8
20.2
Employment
1.8
-1.4
+3.2
Increasing
1
10.2
81.4
8.4
Part-time employment
2.0
-1.9
+3.9
Increasing
1
9.8
82.4
7.8
Hours worked
-0.1
2.9
-3.0
Decreasing
1
12.8
74.3
12.9
Wages and benefits
6.6
12.9
-6.3
Increasing
48
9.4
87.8
2.8
Input prices
9.2
-0.7
+9.9
Increasing
1
20.3
68.6
11.1
Selling prices
1.9
-2.3
+4.2
Increasing
1
16.7
68.5
14.8
Capital expenditures
3.6
1.9
+1.7
Increasing
16
10.9
81.8
7.3
Inventories
5.1
-1.6
+6.7
Increasing
1
22.7
59.7
17.6
Companywide Retail Activity
Sales
18.0
16.6
+1.4
Increasing
22
31.9
54.2
13.9
Internet sales
15.0
12.2
+2.8
Increasing
21
18.8
77.4
3.8
Catalog sales
9.1
3.0
+6.1
Increasing
3
9.1
90.9
0.0
General Business Conditions, Retail
Current (versus previous month)
Indicator Feb
Index
Jan
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
Company outlook
3.1
-1.7
+4.8
Improving
1
20.1
62.9
17.0
General business activity
-2.2
0.8
-3.0
Worsening
1
17.0
63.8
19.2
Business Indicators Relating to Facilities and Products in Texas, Retail
Future (six months ahead)
Indicator Feb
Index
Jan
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Retail Activity in Texas
Sales
27.3
20.5
+6.8
Increasing
72
40.9
45.5
13.6
Employment
-0.9
12.9
-13.8
Decreasing
1
15.3
68.5
16.2
Part-time employment
2.7
4.1
-1.4
Increasing
20
18.2
66.3
15.5
Hours worked
-7.8
-0.7
-7.1
Decreasing
3
10.5
71.2
18.3
Wages and benefits
18.7
37.7
-19.0
Increasing
72
23.4
71.8
4.7
Input prices
28.8
22.0
+6.8
Increasing
70
34.6
59.6
5.8
Selling prices
21.5
30.7
-9.2
Increasing
70
33.3
54.9
11.8
Capital expenditures
19.2
22.0
-2.8
Increasing
47
26.9
65.4
7.7
Inventories
9.7
0.3
+9.4
Increasing
63
32.9
43.9
23.2
Companywide Retail Activity
Sales
21.3
13.3
+8.0
Increasing
71
35.7
49.8
14.4
Internet sales
25.0
14.7
+10.3
Increasing
71
27.8
69.4
2.8
Catalog sales
6.0
-1.3
+7.3
Increasing
1
10.5
85.0
4.5
General Business Conditions, Retail
Future (six months ahead)
Indicator Feb
Index
Jan
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
Company outlook
12.9
11.3
+1.6
Improving
71
28.1
56.7
15.2
General business activity
2.3
12.1
-9.8
Improving
41
21.5
59.3
19.2

*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

February 24, 2015

TSSOS Chart

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

 

Texas Retail Outlook Survey

February 24, 2015

TSSOS Chart

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

Texas Service Sector Outlook Survey

February 24, 2015

Comments from Survey Respondents

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

Credit Intermediation and Related Activities

  • The compensatory impact of the slowdown in the oil industry delayed the effect on the economy in the rural markets, but it is starting to show up.

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

  • The business environment is beginning to be affected by lower oil and natural gas prices. We are selectively making cuts based on the order input, which is slowing now. The outlook will tend to get worse as long as oil prices stay in a $45 to $55 range. Even with lower oil and gas prices, we still have increasing expenses because of regulations.

Publishing Industries (except Internet)

  • We began experiencing layoffs in the oil patch. In combination with the continuing drought and restrictions on water use, retailer confidence has been wounded. For those of us who provide marketing services to the retail and service sectors, the close has become much more difficult.

Telecommunications

  • We are very concerned about the price of oil and the impact on the Houston area. Layoffs are announced weekly, but we've seen no measurable impact to our business yet.

Professional, Scientific and Technical Services

  • Oil prices are no doubt impacting the business. Many of our clients are taking a wait-and-see attitude, looking for some stabilization. At present, we are planning for lower business activities in 2015 and will hope for better than expected results. Hopefully by the end of first quarter we have more clarity into the market and where activity is in fact headed.
  • Our numbers for the first month of 2015 show signs of a strong economy. Our order count for residential transactions is well above the 2014 number, and revenue exceeded 2014 as well. On the commercial side, the order count is tracking the same as 2014 with revenue slightly off. We anticipate a very strong year for the residential market, but feel the commercial market may cool due to the perception that the drop in oil prices will hurt the Texas economy. Once investors realize this drop will not have a major effect on the DFW market, we feel the market will return to 2014 levels.
  • The price of oil is wreaking havoc. The uncertainty of the world situation is causing some concern. Profitability continues to drop.
  • Business has to pick up. If it stays this slow, we won't be here.
  • Oil prices are the great unknown. Extended low prices, while good for the U.S. as a whole, can’t possibly be great for Texas or Texas employment and real estate.
  • Activity in all private sectors of the design and construction industry appears to be strong.

Management of Companies and Enterprises

  • A short month impacted earnings.

Administrative and Support Services

  • The decrease in our average employee work week is due to the New Year’s holiday.
  • The outlook for business activity is improving but not at a rapid pace. Budgets remain tight and competition stiff. The restaurant sector is improving, while manufacturing remains level.
  • We have had some weather problems that caused projects to slow down. Dealing with the Affordable Care Act is causing the company to review the business model in place. We will likely change the model that has served us for so long. We simply cannot maintain the 50-plus workforce.

Ambulatory Health Care Services

  • Our six-month outlook depends on Medicare changes. Currently, there is a 20 percent decrease in fees scheduled for April 1. Also, in March we will begin a new benefit year with employee insurance costs going up 3 percent. These two factors combined will eliminate any salary increases.

Social Assistance

  • We have positive growth and outlook but challenges finding labor. Our overall expansion plans are going well. We think the Houston economy is slowing but not stopping.

Accommodation

  • We are cautiously watching the oil sector, as low prices have begun to reduce travel by oil-related companies and some groups have cancelled their meetings.

Food Services and Drinking Places

  • We are opening a new store in late February. Overall sales are up double digits, and we believe we are benefiting from low gasoline prices. We are putting in a new point of sale system in all restaurants this year, so capital expenditures will be up. We do not have plans to raise prices again, and cheese is dramatically lower so far in 2015 compared with 2014.
  • The Affordable Care Act has added significant costs and challenges for our business.
  • We experienced very strong sales increases last month, and they seem to be continuing, although they've been fluctuating more now that we are into a normal seasonal uptrend. We are attributing the impact primarily to the drop in the cost of gasoline. Wages have not started to climb yet, but we are expecting them to do so in the near future. Our cost of goods has been relatively stable for the last few months, except for the increase at the beginning of January when we renewed some long-term contracts on some products, but over the next six months, we expect to start seeing increases. Thus, we have a tentative price increase planned for May. Capital expenditures are up because we are in the early stages of building a new unit.

Repair and Maintenance

  • Oil drilling activity in the area is shutting down, so that sector is hurting the local economy. Our business is divided between the energy sector and industrial plants that provide products for the automotive industry. The latter looks to be in good shape with the stronger economic outlook.

Religious, Grantmaking, Civic, Professional and Similar Organizations

  • Our organization does poorly when the oil and gas industry is not doing well.

Merchant Wholesalers, Durable Goods

  • We are hiring experienced salespeople to increase our market share. In addition, we hired an e-commerce manager and some part-time help to improve our e-commerce solution.
  • Moisture conditions are much better than last year, but commodity prices are lower, meaning a weaker market for our goods.

Motor Vehicle Parts Dealers

  • We are directly impacted by the oil price situation. We expect some business to drop off as a result. So far, it has been minimal, but some of our customers have advised they will retrench quickly.
  • In our area, January was definitely slower, possibly because of the extra cold weather. We expect February to return to the same level as 2014, if not better.
  • Oil prices are having a negative effect on drilling, fracking and support activities in the Eagle Ford. "Cutback" is the word of the day right now.
  • Oil prices are having a negative effect on high-end spending.

Building Material and Garden Equipment and Supplies Dealers

  • Oil has everyone worried. We don’t think it will be as bad as in the 1980s, but everyone thinks things will slow down.

 

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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