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Government Dallas Fed: Texas service sector activity grew in June

Dallas Fed: Texas service sector activity grew in June

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Texas service sector activity grew at a faster pace 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, picked up from 2.7 in May to 13.6 in June. Positive readings in the survey generally indicate expansion of service sector activity, while readings below zero generally indicate contraction.

The employment index was mostly unchanged at 6.9. The company outlook index increased about seven points to 4.6, and the outlook uncertainty index was roughly unchanged at 19.0.

“Expansion in the Texas service sector strengthened in June, as revenue growth increased and labor market indicators were robust. Perceptions of business conditions improved, although measures of uncertainty continued to be elevated,” said Christopher Slijk, Dallas Fed assistant economist. “Retailers remained pessimistic, reporting weaker current activity and deteriorated outlooks compared to May.”

Key takeaways from the report include:

Wage pressures eased while price pressures inched up. The wages and benefits index fell to 16.9 in June. The selling prices index rose to 6.9, while the input prices index ticked up to 25.8.

Respondents were more optimistic about future business conditions. The future general business activity index jumped from 0.7 in May to 9.0 in June, while the future company outlook index increased nearly eight points to 11.9.

For this month’s survey, Texas business executives responded to supplemental questions on the impact of tariffs.

The survey 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 that report include:

Retail sales continued to decline. The sales index improved but remained in negative territory, coming in at -6.8 in June. Inventories picked up slightly, with the inventories index rising to 1.4.

Labor market indicators deteriorated. The employment index fell over five points to -9.0, its lowest reading since early 2010. The hours worked index remained negative at -3.7.

Retailers were pessimistic about broader business conditions. The general business activity index rose from -15.5 to -9.3, while the company outlook index increased nearly 10 points but also remained negative at -10.8. The outlook uncertainty index fell but was elevated at 26.0.

The Dallas Fed conducts the survey monthly 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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