Texas service sector activity expands at a slower pace in January; retail sales decline, says Dallas Fed survey

For Immediate Release: January 30, 2018

DALLAS—Texas service sector activity continued to increase in January but at a slower pace than in December, according to the Federal Reserve Bank of Dallas’ Texas Service Sector Outlook Survey (TSSOS).

The revenue index, a key measure of state service sector conditions, remained positive but fell sharply from 24.4 in December to 12.8 in January. However, perceptions of broader economic conditions were more optimistic. The general business activity and company outlook indexes increased to their highest levels in more than three years at 22.2 and 20.9, respectively.

“Private service sector growth slowed in January, partly as retail sales fell for the first time in six months,” said Dallas Fed Assistant Economist Amy Jordan. “Despite an easing in the rate of service activity growth, firms’ optimism increased with index measures pushing to multiyear highs.”

Here are some additional takeaways from this month’s report:

Wage and price pressures eased this month. The selling prices index moved down from 16.6 to 12.4. The wages and benefits index fell five points to 15.0, although the majority of firms continued to note no change in compensation costs.

“Upward pressure on selling prices eased from last month, but price expectations picked up, with the future selling prices index rising to its highest level in more than 10 years,” Jordan said.

Respondents were slightly more optimistic about future business conditions. Both the index of future general business activity and the index of future company outlook edged up a point to 36.0 and 34.5, respectively.

TSSOS also includes a component called the Texas Retail Outlook Survey (TROS), which uses information from respondents in the retail and wholesale sectors only.

Key takeaways from this month’s TROS report include:

Retail sales fell for the first time since July. The sales index plunged from 25.6 in December to –3.2 in January. The general business activity index fell three points to 17.8.

Retailers indicated slower employment growth this month. The employment index remained positive but fell sharply from 13.1 to 1.6. The hours worked index dropped 14 points to 1.6.

Retailers were less optimistic about future conditions. The index of future general business activity fell five points to 26.6, while the index of future company outlook fell nine points to 24.5.

The survey is conducted monthly by the Dallas Fed to obtain a timely assessment of activity in the state’s service sector, which represents almost 70 percent of the state economy and employs about 8.5 million workers. Positive readings in the survey generally indicate expansion of service sector activity, while readings below zero generally indicate contraction.

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Media contact:
Jennifer Chamberlain
Federal Reserve Bank of Dallas
Phone: (214) 922-6748
E-mail: jennifer.chamberlain@dal.frb.org