Texas service sector activity accelerates in September; retail sales continue to grow, says Dallas Fed survey
For Immediate Release: September 25, 2018
DALLAS—Texas service sector activity accelerated in September, 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, increased from 21.5 in August to a four-year high of 26.9 in September.
Positive readings in the survey generally indicate expansion of service sector activity, while readings below zero generally indicate contraction.
“The Texas service sector had another strong month in September, with the revenue index rising to its highest level since late 2014,” said Christopher Slijk, Dallas Fed assistant economist. “Compensation costs continued to increase, although fewer respondents reported rising wages compared to August. Firms’ outlooks strengthened, with the company outlook index picking up to a multiyear high.”
Here are some additional takeaways from this month’s report:
Labor market indicators reflected continued employment growth and longer workweeks this month. The employment index increased from 11.5 to 13.8. The hours worked index declined nearly five points but remained positive at 6.9.
Perceptions of broader economic conditions reflected more optimism despite ongoing uncertainty. Both the general business activity index, which increased to 25.6, and the company outlook index, which rose to 21.2, reached their highest levels since 2014. The outlook uncertainty index fell from 11.3 to 9.0 but was above its average for the year thus far.
Price and wage pressures remained elevated this month. The wages and benefits index fell nearly four points to 21.6. The selling price index inched up from 14.2 in August to 15.4 in September.
Respondents’ expectations regarding future business conditions remained strongly positive. The future general business activity index was largely unchanged at 28.1, while the future company outlook index fell slightly to 28.1. Indexes of future service sector activity, such as revenue and employment, also reflected heightened expectations for future growth.
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 continued to grow in September. The sales index dipped slightly from 25.8 in August to 24.2 in September. Growth in inventories picked up, with the inventories index rising nearly four points to a 12-month high of 22.3.
Retailers’ perceptions of broader economic conditions reflected increased optimism in September. The general business activity index rose from 13.7 to 21.2, while the company outlook index surged nearly 16 points to 22.7.
Retailers’ perceptions of future economic conditions remained strong this month. The index of future general business activity increased from 17.6 to 20.5, while the index of future company outlook declined slightly from 24.7 to 22.1. Other indexes of future retail sector activity, such as sales and employment, saw a notable pickup compared with last month.
Retail price pressures increased and wage pressures eased, but both remained elevated in September. The selling prices index picked up over six points to 29.5. The wages and benefits index declined sharply but was positive at 15.0.
Retail employment also picked up. The employment index rose from 9.8 to 17.9, its highest level since mid-2014. The hours worked index fell nearly 10 points but remained positive at 3.5.
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 8.6 million workers.
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Media contact:
James Hoard
Federal Reserve Bank of Dallas
Phone: (214) 922-5307
E-mail: james.hoard@dal.frb.org