March 29, 2022
Texas service sector sees continued growth in March
What’s new this month
For this month’s survey, additional questions were asked of Texas business executives about wages and prices, as well as impacts related to the Russian-Ukrainian war. The results of these questions from the Texas Manufacturing Outlook Survey, the Texas Service Sector Outlook Survey and the Texas Retail Outlook Survey have been published together. Read the results of the special questions.
Activity in the Texas service sector grew at a healthy pace in March, according to business executives who responded to the Texas Service Sector Outlook Survey. The earnings index, a key measure of conditions in the utilities sector, rose from 21.9 in February to 23.4 in March, its highest level in four months.
Labor market indicators point to sustained growth in hiring and hours worked compared to February. The employment index remained unchanged at 14.4 and the part-time employment index also remained stable at 7.0. The hours worked index remained stable at 9.9 in March, with 13% of respondents noting an increase in the average hours worked by employees, against only 3.0% noting a shortening in hours worked.
Perceptions of general business conditions remained positive overall, although optimism was more subdued compared to February. The general activity index fell by six points to 10.6, while the business outlook index, although still positive, fell from 14.2 to 2.7. Uncertainty increased, with the Outlook Uncertainty Index rising from 7.6 to 22.5, its highest level since mid-2020.
In March, upward pressure on wages and prices continued. The wages and benefits index rose from 34.7 to 36.5, with 37% of respondents noting an increase in labor compensation costs compared to February. The selling price index rose from 29.9 to 33.9, while the intermediate consumption price index rose from 51.2 to 59.2. Both readings are records for surveys dating back to 2007.
Despite a drastic increase in uncertainty, respondents’ expectations for future business activity continued to reflect optimism for the future. The future general business activity index slipped from 21.2 to 15.4, while the future income index rose four points to 55.8. Other future service-sector activity indices, such as employment and capital spending, rose or remained elevated, suggesting robust growth over the next six months.
March 29, 2022
Texas retail sales growth stagnates in March
March Retail sales activity fell slightly after a moderate rebound last month, according to business executives responding to the Texas Retail Outlook survey. The sales index, a key measure of state retail activity, fell from 10.2 in February to -3.0 in March. Businesses continued to dip into inventories, with the inventory index dropping from -2.1 to -8.3, its third consecutive negative reading.
Retail labor market indicators remained positive but weakened from February readings. The employment index fell from 11.0 to 2.0, while the part-time employment index fell three points to 5.4. The hours worked index fell from 10.6 to 4.5, suggesting a slower pace of growth in the average number of hours worked among retail workers.
Retailers’ perceptions of general trading conditions turned pessimistic in March. The general activity index fell into negative territory, falling from 2.7 to -9.8, while the business outlook index plunged nearly 19 points to -10.8. Uncertainty about the outlook has also increased moderately, with the corresponding index rising from 2.2 to 7.5.
Pressures on retail prices and wages remained very high in March. The selling price index slipped from 49.9 to 48.6, while the input price index rose five points to 59.7. More than half of retailers noted month-over-month increases in input prices and selling prices. The wage and benefits index was broadly flat at 33.7, remaining at a level suggestive of broad-based retail wage growth.
Expectations for future retail activity eased in March. The future general business activity index fell from 10.1 to 3.0, while the future sales index fell slightly from 39.1 to 37.9. Other indices of future retail activity were mixed, although all remained positive and continued to point to further increases in retail activity through much of 2022.
The Texas Retail Outlook Survey is a component of the Texas Services Sector Outlook Survey that uses information only from respondents in the retail and wholesale industries.
Next release: April 26, 2022
The data was collected from March 15-23, and 265 Texas service industry executives, 42 of whom were retailers, completed the survey. The Dallas Fed conducts a monthly Texas Service Sector Outlook Survey to get a timely assessment of service sector activity in the state. Businesses are asked whether revenue, employment, prices, general business activity and other indicators rose, fell or were unchanged from the previous month.
The 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 companies reporting an increase exceeds the share reporting a decrease, the index will be above zero, suggesting that the indicator has increased from the previous month. If the share of companies reporting a decline exceeds the share reporting an increase, the index will be below zero, suggesting that the indicator has fallen from the previous month. An index will equal zero when the number of companies reporting an increase is equal to the number of companies reporting a decrease. Data have been seasonally adjusted where necessary.