Growth In The Texas Service Sector Accelerates

The Texas service sector grew at a faster pace in December, according to business executives responding to the Texas Service Sector Outlook Survey.

The revenue index, a key measure of state service sector conditions, increased from 12.2 in November to 17.9 in December.

Labor market indicators reflected slightly slower employment growth and slightly longer workweeks this month.

The employment index edged down from 7.0 to 5.5, suggesting a slight deceleration in hiring. The part-time employment index rebounded to 2.3 after dipping into negative territory last month. The hours worked index ticked up to 4.1.

Perceptions of broader business conditions continued to improve. The general business activity index increased nine points to 13.5, its highest reading in more than a year.

The company outlook index was largely unchanged at 11.3. The outlook uncertainty index receded to 1.4, its lowest reading in nearly two years.

Price and wage pressures increased in December. The wages and benefits index moved up from 16.2 to 19.2, while the input prices index held steady at 25.7. The selling prices index rose to 6.9, a six-month high.

Respondents’ expectations regarding future business conditions improved in December. The future company outlook index remained positive but edged down to 15.6, while the future general business activity index shot up nine points to 17.6.

Other indexes of future service sector activity, such as revenue and employment, remained in solidly positive territory, suggesting expectations of continued growth over the next six months.

Retail Sales Growth Picks Up

Growth in retail sales accelerated markedly in December, according to business executives responding to the Texas Retail Outlook Survey.

The sales index rose seven points to 13.5, its highest level in more than a year. Inventories increased, with the index rising to 13.6 after a near-zero reading in November.

Retail labor market indicators suggested slower employment growth and longer workweeks in December.

The employment index remained positive but slipped five points to 2.5, while the part-time employment index shot up 16 points, rebounding from -6.2 to 9.6. The hours worked index also rebounded from negative territory, rising from -0.9 to 10.7.

Retailers’ perceptions of broader business conditions continued to reflect optimism in December, and uncertainty decreased. The general business activity index was largely unchanged at 8.3.

The company outlook index surged 10 points to 15.0, its highest reading in more than a year. The outlook uncertainty index plunged from 14.3 to -9.5, hitting its lowest level since we added the question in January 2018.

The negative December reading indicates that a larger share of businesses said uncertainty regarding their outlook decreased than said it increased.

Retail price pressures remained steady while wages pressures picked up in December. The input prices and selling prices indexes held steady at 20.7 and 18.4, respectively. The wages and benefits index climbed 11 points to 25.1, its highest reading since August 2018.

Retailers’ perceptions of future business conditions improved notably this month. The future general business activity index rose from 1.4 to 14.0, and the future company outlook index rose from 4.6 to 13.9.

Other indexes of future retail activity, such as sales and employment, rose substantially, suggesting more bullish expectations for growth over the next six months.

Source: Federal Reserve Bank of Dallas – The Texas Retail Outlook Survey is a component of the Texas Service Sector Outlook Survey that uses information only from respondents in the retail and wholesale sectors.