In July, the Texas service sector experienced a robust surge in growth, with the revenue index, a vital gauge of state service conditions, climbing by nine points to reach 12.9—the highest in 16 months, according to the Texas Service Sector Outlook Survey. Employment in the sector remained steady, as indicated by the unchanging employment index at 9.2, while part-time employment slid by three points to -0.6. However, the hours worked index rose by four points to 3.5.
The overall sentiment regarding business conditions in July was mixed. While the general business activity index improved by four points to -4.2, the company outlook index increased to 0.5, signifying stabilization. The outlook uncertainty index dropped by three points to 10.9, below its average of 13.5.
July saw a slight easing of price and wage pressures, with the input prices index decreasing to 31.7 and the selling prices index dropping three points to 9.9, both staying above their averages. The wages and benefits index dipped two points to 16.7, slightly above its average of 15.7.
Anticipations for future business activity brightened in July. The future general business activity index turned positive for the first time in 15 months, reaching 4.4 from -1.6. The future revenue index held positive at 35.6, while other future service sector activity indexes exhibited mixed changes, all remaining in the positive zone, reflecting expectations of continued growth in the next half-year. Conversely, the Texas Retail Outlook Survey indicated a decline in retail sales for July, with a five-point improvement in the sales index to -2.4. Inventories in the retail sector grew faster, with the index rising to 12.0.
Retail labor market indicators pointed to slower employment growth and continued shorter workweeks in July. The employment index fell by nine points to 3.2, while the part-time employment index decreased by three points to -1.3. The hours worked index slid from -2.3 to -7.6. Retailers' perceptions of business conditions worsened in July, with the general business activity index plummeting 18 points to -18.1 and the company outlook index falling by 10 points to -10.4. The outlook uncertainty index surged from 6.6 to 24.6.
Despite challenges, expectations for future retail growth improved in July. The future sales index stayed positive at 15.1, and the future general business activity index rose by five points to 5.0. "Labor market indicators pointed to steady employment growth and longer workweeks, while price and wage pressures eased modestly," said Jesus Cañas, Dallas Fed senior business economist. "Perceptions of broader business conditions were mixed in July."