Business increased in August

Tenth District services activity increased in August, and expectations for future growth expanded (Chart 1). Most input and selling price indexes eased down somewhat, with month-over-month selling prices turning negative for the first time since October 2016. However, expectations for future selling prices rose in August.

The month-over-month services composite index was 17 in August, up from -1 in July and 1 in June (Tables 1 & 2). The composite index is a weighted average of the revenue/sales, employment, and inventory indexes. Month-over-month indexes were somewhat mixed in August, but mostly positive. The general revenue/sales index rebounded substantially and the capital expenditures index expanded, while the employment and wages and benefits indexes edged lower. The jump in general revenue/sales index was driven by increases in transportation, restaurants, professional and business activity, and other services. Year-over-year services indexes dipped slightly compared to last month. Compared with a year ago, the services composite index inched down from 17 to 15. Expectations for the services composite index rose from 14 to 18 as the future revenue/sales, inventory, capital expenditures, and access to credit indexes increased.

Composite Index vs. a Month Ago

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Date Composite
Aug-18 10
Sep-18 21
Oct-18 8
Nov-18 14
Dec-18 11
Jan-19 15
Feb-19 10
Mar-19 -2
Apr-19 12
May-19 15
Jun-19 1
Jul-19 -1
Aug-19 17

Special questions

This month contacts were asked special questions about the impact of recent tariff announcements and their expectations regarding the duration of trade tensions. More than 57 percent of business contacts in the Tenth District expect the most recent round of announcements of U.S. tariffs on Chinese goods to negatively impact their business, while less than 3 percent expect a positive impact (Chart 2). Additionally, over 44 percent of firms expect trade tensions to for persist for 6-12 months, and nearly 29 percent of firms expect trade tensions to last for 1-2 years (Chart 3). However, 11 percent of contacts expect trade tensions to subside within 6 months, while 16 percent expect trade tensions to last for more than 2 years.

Selected Services comments

“Consumer confidence seems to be increasing.”

“Low interest rates are helping investment and development deals.”

“Business and demand for cars is still good.”

There is so much uncertainty it becomes impossible to plan. We are busy but looks like we should start thinking seriously about a recession.”

“The biggest tariff impact is the uncertainty. Our quotes are out for several months and we have no idea what will happen between making a quote and receiving the order.”

“We see a fear from customers willing to make a major buy.”

“Growth has slowed the past 45 days due mostly to the aftermath of flooding in the area. Price increases have waned considerably and the rate of inflation we expect for the products we sell may drop below 2%.”

“Our service area has an agricultural sector that is experiencing an economic downturn. The Ag economy was already sluggish and things are getting worse.”

“We had to raise wages much more than normal to get people in the door in 2018/19. We are above market right now and the pressure has eased.”

“I think that wage rates per hour will continue to go up. Our primary way to increase productivity efficiency will be through getting more done with less people.”

“No available employees.”

“We have cut employees, cut hours, but we must keep the good employees we have from moving.”

“The immigration policies are driving away Hispanic labor that is critical to our industry. The supply of citizens willing to work in construction is small and will require higher wages but will also result in longer build times.”

Survey Data

PDFCurrent Release

Excel SpreadsheetHistorical Monthly Data

About the Services Survey

Author

Chad Wilkerson

Vice President, Economist and Oklahoma City Branch Executive

Chad Wilkerson is Branch Executive of the Kansas City Fed’s Oklahoma City Branch office. In this role, he serves as the Bank’s lead officer and regional economist in Oklahoma. He…