Texas service sector activity accelerates sharply; retail sales rebound in May, says Dallas Fed survey
For Immediate Release: May 30, 2018
DALLAS—Texas service sector activity expanded at an accelerated pace in May, 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, increased from 14.7 in April to 22.8 in May, reaching its highest reading so far this year.
“The Texas private service sector accelerated in May, and wages and employment continued to increase—the employment index was at its highest level in nearly four years,” said Christopher Slijk, Dallas Fed assistant economist. “This strengthening is due partly to a surge in retail activity, and the share of respondents noting an increase in sales rose above 50 percent. Service sector firms remained optimistic, as the company outlook index held well above its long-term average.”
Here are some additional takeaways from this month’s report:
Perceptions of broader economic conditions reflected further optimism. The general business activity index advanced four points to 18.5, while the company outlook index rose slightly to 15.4 from 12.7 in April.
Price and wage pressures eased slightly but remained strong. The selling prices index fell from 19.2 to 15.4. The wages and benefits index came in at 22.6, similar to April’s reading.
Labor market indicators reflected continued employment growth. The employment index held mostly steady at 16.6. The hours worked index rose to a six-year high of 10.4.
Respondents were slightly more optimistic about future business conditions. The indexes of future general business activity and future company outlook edged up slightly to 25.7 and 26.8, respectively. Wage expectations also increased, as the future wage and benefits index rose to an 11-year high. Indexes of future service sector activity, such as revenue and employment, also reflected growing optimism this month.
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 bounced back in May. The sales index climbed to 35.1 in May, reaching its highest reading since before the beginning of the oil bust in 2015. Inventories declined, with the index plummeting over 20 points to -8.6.
Retailers’ perceptions of broader economic conditions improved significantly. The general business activity index rebounded from -1.6 to 14.9. The company outlook index rose sharply from 1.5 to 13.2.
Retail employment continued to grow. The employment index dipped to 8.4, a reading well above its average level. The hours worked index picked up to 4.6.
Retail price pressures remained elevated, while wage pressures accelerated. The selling prices index remained largely unchanged at 24.6, well above average. The wages and benefits index increased to 24.1, its highest level since January 2017.
This month, business executives from both manufacturing and service sector firms were asked special questions on the labor market, wages and prices.
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 8.6 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