Dallas Fed services sector outlook index
Dallas Fed services sector outlook index
  • Prior was -0.1
  • Revenue index +8.7 vs +7.7 prior
  • Employment +0.6 vs -0.2 prior
  • Company outlook -3.1 vs +1.0 prior
  • Six month index +12.4 vs +20.5 prior

Comments in the report:

Utilities

  • I feel that a recession is going to hit the U.S.

Warehousing and storage

  • Things are relatively stable, prices increasing but not at such a rapid pace that we have any undue concerns.

Publishing industries (except internet)

  • Our data supports the thesis that consumer spending is paring back materially. We will start seeing significant negative impacts to our business if spending continues to decline at the current rate through the end of the year. We are very concerned that the Federal Reserve has waited too long to trim rates and that by the time any future cuts begin impacting the economy, consumer spending will be at recession levels.
  • We are looking forward to some modest cooling expected on compensation increases and some purchasing budgets.

Data processing, hosting and related services

  • Costs continue to rise while pressure from customers and prospects to decrease prices is continually increasing.

Credit intermediation and related activities

  • The economy is subject to fluctuating market changes caused by anticipated interest rate variations and political instability. Loan activity is slowly improving, but liquidity is continuing to be a challenge with competition for deposits remaining active.
  • The Federal Reserve lowering rates will decrease our cost of funds immediately.

Securities, commodity contracts and other financial investments and related activities

  • Farm and cattle incomes are up this year. Oil and gas activity and tourism have slowed.
  • The amount of political noise is disruptive to business owners. Political ads are proliferating, providing little value and worrying business owners.
  • Activity is stalled slightly due to increasing personal debt along with [interest] rate uncertainty.

Insurance carriers and related activities

  • New projects and new home purchase customers (for insurance) seem to have slowed somewhat.

Real estate

  • As stress percolates through the multifamily real estate industry, we see litigation increasing. Desperate owners and suppliers are filing absurd suits against anyone they think they can blame or collect from.
  • Anticipated lower interest rates will certainly improve the outlook for commercial real estate investments heading into 2025.
  • I feel that the election will dampen activity until after the inauguration, at which time things will pick back up, barring no major problems with the election.

Rental and leasing services

  • We are a large, heavy equipment distributor in Texas, Oklahoma and New Mexico At the end of July we were down 6.3 percent. That decline in this year versus last year has been consistently increasingly throughout the year. We were only down 10 percent during the pandemic of 2020, and we average 10.7 percent increase in sales per year over 65 years. So, this year's decline is unusual for us and is unsettling! People are out of money. They're parking their cars and throwing their keys to the dealership or banker, as it’s car or food for the family. And worst of all, I think it has just begun.
  • Hiring has become easier. Importing our equipment has become easier. We don't import directly, but our rental equipment is manufactured in Korea, and we buy from the importer. Tariffs on Korea would really foul us up if that happened next year. We would have to pass on those costs to our customers, which would inflate our prices in proportion to the tariff.

Professional, scientific and technical services

  • It's curious that news headlines say inflation is going down, but in the design and construction industry, we have not seen prices going down. In fact, they’re going up. For example, a door that cost $3,000 a year or so ago is now pricing in at $10,000. There is less competition in the market. There are fewer local companies. Many have closed due to difficulty in maintaining a workforce and owners close to retirement. Others have sold out. There are still long lead times for items such as transformations and generators.
  • From 2022 we are down 40 percent. We only sold two building permit expediting jobs last month. In July of 2022, we sold over 30. New construction is dwindling. This is much worse than during the Great Recession.
  • It seems like everyone is pretty sure about the way the election and the economy are going. We are not seeing the uncertainty that we normally see in the third quarter of a presidential election year. Our biggest problem is finding qualified engineers. We could grow our business a lot if we could find the right people.
  • Understanding that the psychology of people and the market is a major driver of the economy, the upcoming election will determine the course of American business for the next four years. Honestly, I do not think this economy can withstand the ravages of what it has experienced since 2021.
  • As interest rates remain high, the overall real estate market continues to retract. Orders for both commercial and residential transactions have continued to decline, and we feel the market will not recover until interest rates decrease.
  • We are seeing a little increase in real estate and finance transactions
  • The market and the economy are top priorities.
  • The cost of health care and liability insurance is significantly affecting our business outlook.
  • We continue to get business inquiries and new contracts, though we are experiencing a delay in accounts receivable. We are spending more time trying to get some clients to pay. They are paying eventually, but it is taking longer.
  • We continue to see delays in purchase decisions. We have come to the conclusion that some of it may be due to a fractured decision-making process within our clients’ firms. While a decision was made in a group setting previously, with more distributed workers, these conversations are now a series of one-on-one conversations. These conversations take quite a bit of additional time and in each conversation, they can decide to delay or cancel a project, but all conversations must be positive for approval.

Administrative and support services

  • The biggest issue keeping companies from doing much, in my opinion, is politics.
  • We cannot hire in the wage bracket we compete in.
  • As a search and staffing firm in the business of hiring not only in North Texas but across Texas and the U.S., we have felt like we are in a recession now for months. Senior vice presidents of talent acquisition at 40,000 employee businesses have told us confidentially they are not backfilling roles when existing employees leave the company. Fortune 100 clients have put hiring freezes in place. Mid-market companies are posting fake jobs to pipeline candidates for when they can hire again, as they are not allowed to fill the roles they are posting. Clients are taking longer to pay their invoices, and the few who are hiring are taking longer to make decisions. I have eliminated one position already and am reducing the wages of the staff I have left. Please lower interest rates. I'm very worried you are already too late. But we have to try to get the economy back on track.
  • We are concerned about interest rates and their impact on real estate and general business activity. Financial performance remains strong for those companies not heavily leveraged.

Educational services

  • Higher education enrollment patterns in Texas are finally starting to incorporate national trends, with declines in undergraduate student populations. Although it is early, we expect this decline is likely to increase, creating higher uncertainty and reduced revenue in the coming year.

Ambulatory health care services

  • Customers are having difficulty coming up with funds to pay for our services.
  • One opines that interest rates a bit too high.
    Many borrowers in pain and let out a sigh.
    We plead with grace
    Bring rates to a place
    Where capital formation does not result in a cry!

Texas Retail Outlook Survey

Amusement, gambling and recreation industries

  • Weather has been the real negative factor for our business.

Accommodation

  • In my 15 years at this location, this summer has been the worst business period I have seen in my area (not including COVID). Several factors are contributing to this including construction around the area and lack of group business in the market.

Food services and drinking places

  • Revenue struggles continue mostly due to poor back-to-office reality compared to reports of improved office occupancy. Same for business travel Monday through Thursday. Also, there are clear signs of customers pulling back spending due to our increased prices necessitated by continuing increases in COGS [cost of goods sold] price and wage pressures.
  • The rise in utility bills, insurance and property taxes, plus the fear of recession, are changing my customers’ buying habits.

Merchant wholesalers, durable goods

  • So much depends on the election and what happens after that!

Motor vehicle and parts dealers

  • The sales price per new and used vehicle sold has not changed. However, the volume has increased substantially. With the possibility of lower interest rates, we are optimistic for increased unit volumes over the next six months.
  • Auto sales continue to soften on new vehicles and used vehicles.
  • August has been very soft, even more than usual. Back to school usually sees us slow down some, but not at the current level.

Food services and drinking places

  • A softening in credit terms is resulting in renewed expansion planning as the company looks to new markets and measured expansion in existing markets. The supply of labor seems to have increased, leading to slightly longer employment terms and reduced turnover. Enormous fiscal irresponsibility at the federal level is a continuing concern and will continue to temper leverage and growth.