Texas service sector activity, retail sales pick up in July, says Dallas Fed survey

For Immediate Release: July 31, 2018

DALLAS—Texas service sector activity accelerated in July, according to business executives responding to the Federal Reserve Bank of Dallas’ Texas Service Sector Outlook Survey (TSSOS). The revenue index, a key measure of state service sector conditions, rose from 19.0 in June to a three-year high of 25.4 in July.

Positive readings in the survey generally indicate expansion of service sector activity, while readings below zero generally indicate contraction.

“The Texas service sector continued to report overall strength, with the revenue index at its highest level since late 2014,” said Christopher Slijk, Dallas Fed assistant economist. “Wage and price pressures remain elevated—the wages and benefits index held steady at an all-time high—although there was some easing among retailers.”

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

Perceptions of broader economic conditions continued to reflect optimism. The general business activity index fell slightly from 22.4 in June to 21.1 in July. The company outlook index was largely unchanged at 14.2.

Labor market indicators declined but remained positive. The employment index fell slightly from 13.9 in June to 11.9 in July. The hours worked index dipped to 9.1, though it remains above its 12-month average.

Expectations regarding future business conditions were optimistic but softened slightly. The future general business activity index fell over three points to 25.5, while the future company outlook index inched down from 27.6 in June to 26.1 in July. The future wages and benefits index rose to its highest level since early 2007.

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 and inventories rose. The sales index increased from 1.6 in June to 6.0 in July. Inventories grew at an accelerated pace, with the index rising to its highest level in nearly a year.

Retail employment growth slowed. The employment index fell from 10.7 in June to 3.3 in July. The hours worked index declined from 9.1 to 0.6.

Price and wage pressures eased but remain elevated. The selling prices index plummeted from 27.0 in June to 15.3 in July, its lowest reading in a year. The wages and benefits index fell over eight points to 21.1.

Retailers were slightly less optimistic about future economic conditions. The index of future general business activity declined to 19.5. The index of future company outlook fell to 9.2. Other indexes of future retail sector activity also fell, particularly future sales, which dropped over 20 points to 22.1.

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