Federal Reserve Bank of Dallas Service and Retail Survey Shows Record Activity Decline

On March 31, 2020, the Federal Reserve Bank of Dallas released its monthly Texas Service Sector Outlook Survey. The monthly service sector report includes a retail as a sub-sector.

Service Sector Outlook

The March Service Sector survey shows an all-time record monthly decline in the revenue index, which fell from 14 in February to -67 in March. Current perception of business conditions also deteriorated significantly with a drop of 85 points in the general business activity index and 80 points in the company outlook index. Uncertainty in Service Sector respondents’ outlook also surged to a record reading.

Given these results, as well as jobless claim numbers totaling over 16 million in the last few weeks, it is not surprising that Service Sector labor market measures were also negative. The employment index dropped to a record low of -23.8 in March from 6.1 in February.

Respondents’ future expectations for the service sector also dove lower, with indications that a recovery is at least six months away.

Retail Outlook

The sub-sector for Retail showed an even sharper decline, with a record reduction in the sales index from -2.5 in February to -82.6 in March. Many of the readings for March were at all-time lows for the sector, with the general business activity index bottoming out at -84.2 and the company outlook index hitting -83.8. Retail uncertainty also surged to an all-time high.

Retail had similar labor results, losing 29.4 points in the employment index, the lowest reading since the Great Recession.

Future business condition outlook deteriorated in March for retail with the general business activity index and future company outlook index both losing approximately 65 points. Other future outlook indexes also dropped precipitously and show expectations of continued pain in the sector over the next six months.

COVID-19 Special Questions

The March survey included special questions related to COVID-19 impacts to Texas business respondents to the Manufacturing, Service, and Retail sector surveys. Notable results by percentage of responses include:

• An increase in general uncertainty (84%),
• Increases in input prices (23%)
• Decreased selling prices (33%)

Some 60% reported negative effects to their business from availability of materials or inputs, production, and demand for products or services. Nearly 75% reported that they expect demand for products or services to be negatively impacted going forward in 2020.

In response to the question of how long Texas businesses expect the coronavirus impact to last:

• less than three months (19%)
• three to six months (46%)
• six to nine months (16%)

The next Texas Service Sector Survey report is due out April 28, 2020. For questions about the Texas Service Sector Outlook Survey or for assistance navigating the impacts of COVID-19 on the manufacturing industry, contact a Weaver professional today. We’re here to help.

© 2020