The Texas service sector decelerated notably in January, according to business executives responding to the Texas Service Sector Outlook Survey.

  • The revenue index, a key measure of state service sector conditions, fell from 20.4 in December to 2.8 in January.
  • Labor market indicators suggest continued increases in hiring and hours worked, though at a somewhat slower pace. The employment index slipped from 10.7 in December to 9.2, while the part-time employment index weakened three points to 3.2. The hours worked index slid from 10.0 to 7.4.
  • Perceptions of broader business conditions plateaued in January. The general business activity index plunged from 14.2 to 0.6, while the company outlook index declined from 14.0 to -0.4. Uncertainty increased more steeply, with the outlook uncertainty index rising from 10.4 to 19.7.
  • Wages and prices continued to surge in January, and indexes climbed to at or near historically high levels. The wages and benefits index rose to a new record of 37.4. The selling prices index advanced from 28.3 to 29.7, while the input prices index rose from 49.l to 50.4.

  • Respondents’ expectations regarding future business activity continued to reflect optimism. The future general business activity index dropped five points to 16.7 but remained above its series average, while the future revenue index held flat at 53.4. Other future service sector activity indexes such as employment and capital expenditures slipped but remained in firmly positive territory.

Meanwhile, the Januaryretail sales activity fell notably compared with December, according to business executives responding to the Texas Retail Outlook Survey.

  • The sales index, a key measure of state retail activity, plunged 20 points to -8.1 in January, its weakest reading in three months. Firms saw a sharp decline in inventories, reversing the prior month’s increase as the index fell from 15.8 to -10.0.

  • Retail labor market indicators were mixed in January. The employment index remained positive but inched down from 7.5 to 6.0, while the part-time employment index dropped from 8.3 to 1.6. The hours worked index weakened from 5.1 to -0.3.

  • Retailers’ perceptions of broader business conditions turned negative in January. The general business activity index tumbled 14 points to -7.2, while the company outlook index plunged nearly 27 points to -10.6—its lowest reading since May 2020. Outlook uncertainty surged, as the related index jumped from 2.4 to 24.0.

  • Retail price and wage pressures eased somewhat in January, though the indexes remained elevated. The selling prices index slid from 46.5 to 43.9, while the input prices index held roughly flat at 45.2. The wages and benefits index declined five points to 37.1.

    Despite deteriorating current conditions, expectations for future retail activity remained optimistic. The future general business activity index fell from 10.9 to 4.2, while the future sales index held flat at 44.5. Other indexes of future retail activity were mixed but remained positive, suggesting continued strength going into the first half of 2022.