June 28, 2022
Texas Service Sector Growth Strengthens in June
What’s New This Month
For this month’s survey, Texas business executives were asked supplemental questions on wages, prices and revenue restraints. Results for these questions from the Texas Manufacturing Outlook Survey, Texas Service Sector Outlook Survey and Texas Retail Outlook Survey have been released together. Read the special questions results.
Activity in the Texas service sector picked up modestly in June, according to business executives responding to the Texas Service Sector Outlook Survey. The revenue index, a key measure of state service sector conditions, rose from 6.3 in May to 9.4 in June, as the share of firms reporting increasing revenues grew to 31 percent.
Labor market indicators continued to suggest steady growth in employment and hours worked compared with May. The employment index was roughly unchanged at 7.6, although the part-time employment index dipped one point to 1.9—its lowest reading since early 2021. The hours worked index was flat at 4.9, with about 10 percent of firms increasing employee hours compared with 5 percent cutting hours.
Perceptions of broader business conditions plunged in June, as firms noted a surge in outlook uncertainty. The general business activity index plunged from 1.5 to -12.4, as the share of firms noting a worsening of activity rose from 20 percent to 27 percent. The company outlook index similarly dropped into negative territory at -14.7—its worst reading since July 2020. The outlook uncertainty index surged 16 points to 41.2, nearing its record-high level during the initial onset of COVID in April 2020.
Price and wage pressures remained near record highs in June. The selling prices index moderated three points to 29.4, while the input prices index increased by two points to 55.8. The wages and benefits index was roughly flat at 34.6, though nearly 40 percent of firms noted higher wages compared with May.
Respondents’ expectations regarding future business activity weakened further in June. The future general business activity index dropped deeply into negative territory at -24.0, while the future revenue index declined nearly 17 points to 19.0. Other future service sector activity indexes such as employment and capital expenditures declined, suggesting expectations for weaker growth over the second half of the year.
June 28, 2022
Texas Retail Sales Deteriorate in June
June retail sales activity continued to decline, according to business executives responding to the Texas Retail Outlook Survey. The sales index, a key measure of state retail activity, was roughly unchanged at -11.0 in June. Retailers’ inventories held mostly flat for a third consecutive month, with the inventories index reporting a near-zero reading.
Retail labor market indicators weakened in June. The employment index dipped into negative territory for the first time since July 2021, falling four points to -3.3, while the part-time employment index plunged eight points to -8.1. The hours worked index similarly declined eight points to -6.1, its weakest reading in a year.
Retailers’ perceptions of broader business conditions turned sharply pessimistic this month compared with May. The general business activity index shed 22 points to -25.2, while the company outlook index fell from -4.1 to -22.2; just 12 percent of retailers noted improved outlooks compared with 35 percent expecting worsening conditions. The outlook uncertainty index surged to 42.3, its highest reading since March 2020.
Retail price and wage pressures remained highly elevated in June. The selling prices index fell five points to 37.1, although a majority of firms continued to note they increased their selling prices over the past month. The input prices index held steady at 49.9, while the wages and benefits index was also stable at 30.4.
Expectations for future retail growth deteriorated significantly in June. The future general business activity index fell 23 points to -26.8, while the future sales index declined 17 points to 0.9. Other indexes of future retail activity also declined, suggesting lowered expectations for growth for the rest of 2022.
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.
Next release: July 26, 2022
Data were collected June 14–22, and 284 Texas service sector business executives, of which 55 were retailers, responded to the survey. The Dallas Fed conducts the Texas Service Sector Outlook Survey monthly to obtain a timely assessment of the state’s service sector activity. Firms are asked whether revenue, employment, prices, general business activity and other indicators increased, decreased or remained unchanged over the previous month.
Survey responses are used to calculate an index for each indicator. Each index is calculated by subtracting the percentage of respondents reporting a decrease from the percentage reporting an increase. When the share of firms reporting an increase exceeds the share reporting a decrease, the index will be greater than zero, suggesting the indicator has increased over the prior month. If the share of firms reporting a decrease exceeds the share reporting an increase, the index will be below zero, suggesting the indicator has decreased over the prior month. An index will be zero when the number of firms reporting an increase is equal to the number of firms reporting a decrease. Data have been seasonally adjusted as necessary.