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Texas Service Sector Outlook Survey

Report in PDF
June 28, 2016

Texas Service Sector Activity Expands

What's New This Month

For this month's survey, Texas business executives were asked supplemental questions on the impact of lower energy prices. 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 picked up in June, 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 5.8 to 15.6, its highest reading in 11 months.

Labor market indicators reflected slower employment growth but longer workweeks this month. The employment index remained positive but edged down from 4.5 to 2.0. After declining last month, the hours worked index rebounded to positive territory, rising 5 points to 3.6.

Perceptions of broader economic conditions were mixed in June. The general business activity index was similar to May at -7.7, its sixth consecutive negative reading. The company outlook index rose slightly from -2.9 to a reading near zero, with equal shares of respondents reporting that their outlook improved from last month as reporting their outlook worsened.

Price and wage pressures increased very slightly this month. The selling prices index edged up from 4.4 to 5.7. The wages and benefits index ticked up a point to 15.7, although the majority of firms continued to note no change in compensation costs.

Respondents’ expectations regarding future business conditions were mixed in June. The index of future general business activity dipped from 1.3 to a reading near zero. The index of future company outlook rose slightly from 6.3 to 8.4, reflecting more optimism. Indexes of future service sector activity, such as future revenue and employment, continued to reflect optimism this month.

Texas Retail Outlook Survey

June 28, 2016 

Retail Sales Rebound

Retail Sales Rebound

Retail sales increased modestly in June, according to business executives responding to the Texas Retail Outlook Survey. After dipping into negative territory last month, the sales index rose 6 points to 3.2. Inventories were essentially unchanged in June after decreasing last month.

Labor market indicators worsened this month. The employment index fell into negative territory from 1.4 to -2.1, indicating layoffs among retailers. The hours worked index remained negative for a fourth consecutive month but rose from -9.5 to -3.4, suggesting workweeks continued to shorten albeit to a smaller extent than in the prior month.

Retailers’ perceptions of broader economic conditions were mixed in June. The general business activity index remained negative for a third consecutive month but moved up from -13.3 to -10.2. The company outlook index rebounded from a negative reading last month to 3.2 in June, with 18 percent of respondents reporting that their outlook improved and 15 percent noting that it worsened.

Retail price pressures increased, while wage pressures were unchanged this month. The selling prices index jumped from 5.3 to 15.5. The wages and benefits index was similar to last month at 8.6.

Retailers’ perceptions of future broader economic conditions were mixed in June. The index of future general business activity remained negative for a second consecutive month and edged down further from -3.3 to -4.9. The index of future company outlook rose from 9.2 to 13.9. Indexes of future retail sector activity continued to reflect 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 June 14–22, and 285 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: July 26, 2016

Texas Service Sector Outlook Survey

June 28, 2016
 

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 Jun
Index
May
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Revenue
15.6
5.8
+9.8
Increasing
79
32.6
50.4
17.0
Employment
2.0
4.5
-2.5
Increasing
76
14.2
73.6
12.2
Part-time employment
-0.8
1.6
-2.4
Decreasing
1
8.2
82.8
9.0
3.6
-1.3
+4.9
Increasing
1
10.2
83.2
6.6
Wages and benefits
15.7
14.7
+1.0
Increasing
81
19.6
76.5
3.9
Input prices
23.3
19.9
+3.4
Increasing
86
26.0
71.3
2.7
Selling prices
5.7
4.4
+1.3
Increasing
4
11.5
82.7
5.8
Capital expenditures
4.2
9.5
-5.3
Increasing
82
13.2
77.7
9.0
General Business Conditions
Current (versus previous month)
Indicator Jun
Index
May
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
Company outlook
-0.4
-2.9
+2.5
Worsening
2
16.4
66.8
16.8
General business activity
-7.7
-7.1
-0.6
Worsening
6
11.8
68.7
19.5
Business Indicators Relating to Facilities and Products in Texas
Future (six months ahead)
Indicator Jun
Index
May
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Revenue
33.4
33.5
-0.1
Increasing
88
46.3
40.8
12.9
Employment
16.7
18.7
-2.0
Increasing
87
27.7
61.3
11.0
Part-time employment
5.5
6.6
-1.1
Increasing
48
14.4
76.7
8.9
1.7
1.5
+0.2
Increasing
8
8.9
83.9
7.2
Wages and benefits
40.4
37.0
+3.4
Increasing
114
43.8
52.8
3.4
Input prices
40.4
37.6
+2.8
Increasing
114
42.2
56.0
1.8
Selling prices
21.5
19.8
+1.7
Increasing
86
26.6
68.3
5.1
Capital expenditures
17.0
23.6
-6.6
Increasing
87
25.7
65.6
8.7
General Business Conditions
Future (six months ahead)
Indicator Jun
Index
May
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
Company outlook
8.4
6.3
+2.1
Improving
4
22.7
63.0
14.3
General business activity
-0.9
1.3
-2.2
Worsening
1
17.3
64.5
18.2

*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 Retail Outlook Survey

June 28, 2016
 

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 Jun
Index
May
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Retail Activity in Texas
Sales
3.2
-2.8
+6.0
Increasing
1
30.2
42.7
27.0
Employment
-2.1
1.4
-3.5
Decreasing
1
10.4
77.1
12.5
Part-time employment
0.0
0.0
0.0
No Change
3
13.5
73.1
13.5
Hours worked
-3.4
-9.5
+6.1
Decreasing
4
7.4
81.8
10.8
Wages and benefits
8.6
8.5
+0.1
Increasing
74
13.3
82.0
4.7
Input prices
16.9
17.7
-0.8
Increasing
5
19.7
77.5
2.8
Selling prices
15.5
5.3
+10.2
Increasing
4
20.5
74.5
5.0
Capital expenditures
-1.9
15.4
-17.3
Decreasing
1
9.4
79.2
11.3
Inventories
-0.9
-2.4
+1.5
Decreasing
2
21.8
55.5
22.7
Companywide Retail Activity
Sales
16.0
8.3
+7.7
Increasing
13
34.5
47.1
18.5
Internet sales
20.4
5.0
+15.4
Increasing
2
25.9
68.6
5.5
Catalog sales
6.3
-6.5
+12.8
Increasing
1
9.4
87.5
3.1
General Business Conditions, Retail
Current (versus previous month)
Indicator Jun
Index
May
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
Company outlook
3.2
-1.6
+4.8
Improving
1
17.8
67.6
14.6
General business activity
-10.2
-13.3
+3.1
Worsening
3
15.1
59.6
25.3
Business Indicators Relating to Facilities and Products in Texas, Retail
Future (six months ahead)
Indicator Jun
Index
May
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Retail Activity in Texas
Sales
22.6
27.0
-4.4
Increasing
88
36.1
50.4
13.5
Employment
5.0
5.7
-0.7
Increasing
16
17.8
69.4
12.8
Part-time employment
1.1
-2.1
+3.2
Increasing
1
11.9
77.3
10.8
Hours worked
-0.9
-0.7
-0.2
Decreasing
2
7.2
84.7
8.1
Wages and benefits
28.7
27.5
+1.2
Increasing
90
32.2
64.3
3.5
Input prices
29.4
35.3
-5.9
Increasing
86
31.4
66.7
2.0
Selling prices
29.4
31.4
-2.0
Increasing
86
33.3
62.7
3.9
Capital expenditures
7.8
20.0
-12.2
Increasing
63
19.6
68.6
11.8
Inventories
0.6
3.8
-3.2
Increasing
4
22.0
56.6
21.4
Companywide Retail Activity
Sales
18.3
27.9
-9.6
Increasing
87
33.2
51.9
14.9
Internet sales
20.0
15.1
+4.9
Increasing
87
22.9
74.3
2.9
Catalog sales
-0.3
-4.2
+3.9
Decreasing
2
3.8
92.1
4.1
General Business Conditions, Retail
Future (six months ahead)
Indicator Jun
Index
May
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
Company outlook
13.9
9.2
+4.7
Improving
4
22.8
68.3
8.9
General business activity
-4.9
-3.3
-1.6
Worsening
2
17.7
59.7
22.6

*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

June 28, 2016

TSSOS Chart

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

 

Texas Retail Outlook Survey

June 28, 2016

TSSOS Chart

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

Texas Service Sector Outlook Survey

June 28, 2016

Comments from Survey Respondents

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

Credit Intermediation and Related Activities

  • The hiring climate in Central Texas is very competitive, especially for technical people, i.e., network services, developers and user experience/designers. We believe we are forced to overpay for talent in these areas and are evaluating other markets with similar attributes to Central Texas—including Lincoln/Omaha, Des Moines, Minneapolis/St. Paul and Indianapolis—but they have lower costs of living, which should translate into wages that are more in line with the value we receive from these positions.
  • Firming oil prices has led to a more confident outlook; however, the energy collapse continues to negatively impact petro-chemical and industrial business activity. Three large industrial entities reported severe slowness in new business. Residential home building is robust and is offsetting oil patch job losses.
  • Agriculture commodity prices will have a delayed outcome on agriculture outlooks, which will be partially offset by yields exceeding expectations where harvesting was able to be completed. Cattle prices continue to slide even with supplies being down and green grass in the pastures. Goat and sheep prices are steady to good and with current inventory levels, prices should be maintained throughout the fall season. Rural markets are just maintaining, but the overflow from commercial development in the metropolitan statistical areas has been a boost for business and industrial and commercial real estate lending. Economic anxiety is the biggest deterrent to a more positive economic environment, and government intervention imposing overburdening regulation is stifling potential improvement in the economy from a banker’s perspective. The attitude of the administration has to change soon before we are beyond repairing our national well-being. I am thankful that I live in the country and have my own food and water sources and an ample store of whisky.

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

  • Our business continues to languish along. There is no real reason for business to get better until there is a substantial and sustained increase in the oil and gas machinery and equipment business. The increase in this business depends solely on the prices of oil and natural gas, which will increase with sustained demand. Meantime, the cost of health and business insurance, property taxes, federal regulation costs, etc. just keep going up. There is not a bright outlook.

Insurance Carriers and Related Activities

  • Summer slowdown has kicked in. It is really quiet in far Northeast Texas.

Real Estate

  • The election is weighing on everyone and there is no real optimism for either candidate. Costs and regulations are continuing to escalate and make it more difficult for small businesses. The unknowns with the election are starting to dampen customer confidence, and I think will keep growth from accelerating until next year at the soonest.

Professional, Scientific and Technical Services

  • Our revenue increased because several projects in our backlog were finally released for design. Simultaneously, we were able to loan out a few employees to a friendly competitor for a couple of months, which is reducing our staffing costs while allowing us to retain the employees in the mid-term. Projects in the Houston area continue to stagnate due to decreases in energy and related increases in office space on the sublease market. Work in other regions of Texas is increasing.
  • Definite slowdown in commercial construction. Proposals, which we use as sign of future activity, are off approximately 8 percent over the last five months, trending to same activity as 2013.
  • The oil and gas slump and declining stock market have hurt our revenue. Companies are holding on decisions, stalling and delaying, and in general it is challenging to plan for the future. The government's approach to small business is not beneficial.
  • The bottom has fallen out. We have been going along okay, and all of a sudden everything has dried up. We are looking at layoffs for the first time since 2009.
  • Activity in the realm of marketing communications is robust right now and projected to remain that way through 2016. Great talent is available to relocate to Texas, and we are taking advantage of that, which means new furnishings, technology elements, etc.
  • As an independent consultant in the energy sector, I see some improvement in the attitude of others in similar consulting roles, but we all consider the stabilization of the price of oil (and its increase) as a driver for our having more work.

Management of Companies and Enterprises

  • The overreach of our federal government and regulatory bodies is pretty much choking any hope of recovery.
  • We are spending way too much time trying to comply with regulations. There is no end to the audits: financial audits, compliance audits, IT audits, operational audits. I honestly think the regulators sit in a room and try to invent new things to write us up for. There are some regulations that have been on the books for many years that suddenly get interpreted in a new way. Next thing you know, we are writing new policies and procedures. I feel the regulators get pressured, so they pressure us. Someone needs to wake up and realize that a whole lot of this work is accomplishing nothing. Many times when I ask an auditor/examiner why they are doing some of their audit steps that seem silly, they tell me they are "covering themselves." I don't blame them, but it is sad that it has come to that.

Administrative and Support Services

  • We have seen a cutback in service from some of our main customers in retail and manufacturing, which we have not been able to replace at this time. I see both of these types of customers as very cautious about the future. It will take us the rest of the year to recover those lost sales. This will have an effect on our investment in further technology upgrades and employment.
  • Our aviation customers overall have increased their request for quotes from last month. The oil and gas sector has remained low, but it seems to have stabilized, with no further loss of customers at this point from last month. Optimism seems to have increased. The military part supplier customers are stable, but no new business is expected for this month. The overall industrial sector seems flat, not much growth expected as far as new customers for us.
  • We have had a shortage of full-time professional employees. We are currently adding to this shortage and giving the long-term intense training that is necessary to retain these individuals. The second half of 2016 should be an improvement over the first half of the year.

Publishing Industries (except Internet)

  • The negative outlook of our clients and prospects because of all the uncertainty of government intervention (and perceived upcoming intervention) is impacting purchasing decisions. Many purchases expected over the next two quarters have moved out 90 to 180 days. We are adjusting our business model to try to bypass this. The coming months will tell if it works.

Telecommunications

  • The economy in Houston continues to be a challenge due to the oil bust. Home, apartment, retail and office vacancies continue to increase, while developers and builders continue to build new units for each of the aforementioned types of buildings. Construction planning and financing by banks and investors seem to be off base with the reality of the market. We may experience worse economic conditions in 2016 and 2017 due to oversupply of buildings.

Ambulatory Health Care Services

  • We are considering the purchase of a couple of system solutions, which would be approximately three to six months out.

Hospitals

  • Rural hospitals continue to struggle to meet unfunded mandates by our government.

Nursing and Residential Care Facilities

  • Finding qualified employees is extremely difficult; 70 percent do not pass the state-required background check. Health care and benefit costs prohibit us from providing enough work hours to retain good part-time employees. Overtime costs for full-time employees are driving costs up, but less than the cost of providing health care to entry-level employees.

Accommodation

  • Sluggish economy is holding down hotel prices. We are also struggling to find associates for entry-level positions.
  • We are seeing a tight labor market, which is requiring us to adjust our wages upward. Our outlook is slightly down but not in a significant way. We may have been hurt by the recent rains, which may have dampened demand. With the recent notification of the change in the overtime exemption rule in December, we will be faced with significant expense increase.

Food Services and Drinking Places

  • Too much government intrusion, with huge extra costs associated.
  • One new restaurant opened in El Paso in June. Another will open in Del Rio in July. Comparable store sales are running slightly positive. New overtime rules will have an impact on how we have to pay our current salary managers.
  • Revenue is up but by slightly less than our price increases in place. This is a marked slowdown from the recent past where we had been consistently up more than our price increases. The number of employees and hours worked have remained quite constant—much to my chagrin given that our sales have slowed. Operations are running well over our targeted labor levels as they have failed to adjust to our shortfall in the seasonal adjustment that happens at the end of the school year. Wages and benefits are starting to experience some upward pressure. Some of our key operations staff indicated it is getting harder to find qualified candidates both at the hourly level and at the management trainee level. I reviewed our hourly rates per position and found that, in total, we still have an annual rate of increase of less than 2 percent. However, the bottom two hourly positions—busser and host—moved up just over 3 percent year over year. This is partially because we made the decision to use $8 as our minimum (for all but food servers). There were only a handful of employees paid less than $8, so it did not make a substantial difference. In comparison, the year-over-year increase for cooks is 1.42 percent, and the food server staff has not had any change in rate of pay. Our prices are up 1.43 percent over last year. Cost of goods sold is virtually even with last year. Our capital expenditures have returned to normal since we completed and opened our latest new restaurant in April. We are still spending for remodels and new equipment—we just finished a fairly major remodel of one of our older restaurants—but that is normal and ongoing pretty much at all times. I marked our outlook and general business activity as worse since we have clearly slowed down in the last several weeks. We aren't giving up on the summer as a whole yet, so I have marked the six-month horizon as about the same. Hopefully, that doesn't turn out to be too optimistic.

Support Activities for Transportation

  • Reduction in health care costs, including additional employee contribution with no pay increase, is driving compensation down. This is causing some turnover in seasoned, trained employees.

Merchant Wholesalers, Durable Goods

  • A new website will be launched at the end of third quarter, and we expect to hire five to seven people in Texas and see an increase in sales.
  • Moisture conditions improved, generating better crops. Relatively low commodity prices create future uncertainty.

Merchant Wholesalers, Nondurable Goods

  • Summertime slowdown has hit. Loss of sales days in April and May due to weather issues did not help. I was hoping for a bounce back in June, but not sure if we will see it coming.

Motor Vehicle Parts Dealers

  • We are feeling the impact of lower overall demand due to oil sector issues.
  • In the truck sales business we are in, the feeling among most all dealers is that there is a definite slowing of pace. Factories are either laying off employees or are complaining about not enough orders and threatening layoffs. Of course this has a negative impact to suppliers in the supply chain for the factories.

Building Material and Garden Equipment and Supplies Dealers

  • Business is steady but flat compared with 2015, which was a much better year than some of the previous years so we can live with this for awhile. Pressure on margins and finding qualified employees is a struggle. I'd say the glass is half full, and we need more water before evaporation sets in.

 

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
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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
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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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