Business Activity Rose Moderately in October
The month-over-month services composite index was 10 in October, up from 0 in September and -3 in August (Tables 1 & 2). The composite index is a weighted average of the revenue/sales, employment, and inventory indexes. Business services cooled slightly, driven by moderate declines in activity in the transportation sector, while consumer services ticked up driven by increased activity in health services and non-discretionary retail trade. Most month-over-month indexes were positive except the indexes for credit conditions and hours worked. The monthly general revenue/sales index grew further from 6 to 16, and the employment index rose from -10 to 2. The year-over-year composite index edged up from 6 to 8, driven by increased growth in consumer services, while the employment index fell further from -8 to -16. Expectations for future activity in services eased from 12 to 4, primarily driven by lower employment expectations.
Services Composite Indexes
Skip to data visualization table| Date | Vs. a Month Ago | Vs. a Year Ago |
|---|---|---|
| Oct-25 | -4 | 8 |
| Nov-25 | -6 | 6 |
| Dec-25 | 1 | -1 |
| Jan-26 | 2 | 19 |
| Feb-26 | 6 | 11 |
| Mar-26 | 15 | 8 |
| Apr-26 | 3 | 8 |
| May-26 | 10 | 12 |
| Jun-26 | 5 | 10 |
| Jul-26 | 14 | 10 |
| Aug-26 | -3 | 11 |
| Sep-26 | 0 | 6 |
| Oct-26 | 10 | 8 |
Composite Indexes vs. a Year Ago by Sector
Skip to data visualization table| Date | Consumer Services | Business Services |
|---|---|---|
| Oct-25 | 20 | -15 |
| Nov-25 | 11 | -5 |
| Dec-25 | 1 | -2 |
| Jan-26 | 22 | 10 |
| Feb-26 | 12 | 11 |
| Mar-26 | 11 | 0 |
| Apr-26 | 9 | 6 |
| May-26 | 17 | 3 |
| Jun-26 | 9 | 12 |
| Jul-26 | 10 | 11 |
| Aug-26 | 13 | 10 |
| Sep-26 | 3 | 10 |
| Oct-26 | 10 | 4 |
Special Questions
This month, contacts were asked special questions about cost pass through ability and customer sensitivity to price changes. Almost a quarter (22%) of firms reported they are not able to pass through their higher costs to customers in the form of higher prices, 34% of firms reported they are able to pass through 1-20% of their higher costs, 8% of firms reported 21-40%, 8% of firms reported 41-60%, 6% reported 61-80%, 18% reported 81-100%, 1% reported more than 100%, 1% reported they have not faced higher costs, and 2% reported they have had to decrease prices (Chart 3). Firms were also asked about how their customers’ sensitivity to price has changed compared to six months ago. A quarter of firms reported their customers’ sensitivity is much more sensitive now than six months ago, 38% of firms reported their customers’ sensitivity is somewhat more sensitive, 35% of firms reported their customers’ sensitivity is about the same, 1% of firms reported their customers’ sensitivity is somewhat less sensitive, and 1% of firms reported their customers’ sensitivity is much less sensitive now than six months ago (Chart 4).
Selected Services Comments
“Customers are worried about the future.”
“Consumer is strong. Wholesale customers are still in shock from uncertainty. We wholesale to hundreds of specialty retailers and some regional retailers. Although our retailers are beginning to replenish inventory mostly because they were so conservative over the last 18months.”
“Prices and costs are a huge concern in our industry. Our input prices, fuel and personnel costs are all up in a way that's problematic. We are raising our prices, but at some point, customers will stop buying.”
“Companies seem to be pocketing profits. They are spending money on the absolute need to haves not the nice to haves.”
“This is the toughest environment we have faced in at least 10 years. Input prices increasing and market is becoming ultra-competitive.”
Survey Data
The views expressed are those of the authors and do not necessarily reflect the positions of the Federal Reserve Bank of Kansas City or the Federal Reserve System.
Authors
Cortney Cowley
Assistant Vice President and Oklahoma City Branch Executive
