Business Activity Continued to Grow
Tenth District services continued to grow in May and expectations for the next six months expanded further (Chart 1 & Table 1). Price growth cooled this month but increases in selling prices cooled more than input prices, further compressing margins.
The month-over-month services composite index was 11 in May, up from 9 in April and 7 in March (Tables 1 & 2). The composite index is a weighted average of the revenue/sales, employment, and inventory indexes. Growth was driven by increases in activity in the wholesale, real estate, and professional services sectors. All month-over-month indexes were positive except access to credit. General revenue/sales grew further, and the employment index reached its highest level in nearly two years. The year-over-year composite index ticked down to 4 from 7, as revenues and inventories growth cooled. Capital expenditures have increased sharply from this time last year. The composite expectations index for services activity increased to 10 from 2, as firms anticipate revenues to surge in the coming months.
Services Composite Indexes
Skip to data visualization table| Date | Vs. a Month Ago | Vs. a Year Ago |
|---|---|---|
| May-23 | 2 | -4 |
| Jun-23 | 11 | -11 |
| Jul-23 | -1 | -11 |
| Aug-23 | -1 | 5 |
| Sep-23 | 1 | 4 |
| Oct-23 | -1 | 9 |
| Nov-23 | 0 | 2 |
| Dec-23 | -7 | 8 |
| Jan-24 | -2 | -7 |
| Feb-24 | 12 | -11 |
| Mar-24 | 7 | -2 |
| Apr-24 | 9 | 7 |
| May-24 | 11 | 4 |
Special Questions
This month contacts were asked special questions about their ability to pass through higher costs to customers. Nearly half (48%) of District services firms reported the ability to pass through 0-20% of their increased costs to customers. 14% (10%) of firms were able to pass through 40-60% (60-80%) of costs, 16% passed through 80-100%, and 8% of firms have decreased prices. (Chart 2). Firms were also asked about their expectations for wage increases. 8% of firms expect wages to rise significantly faster over the next year compared to the past 12 months, 22% expect wages to rise slightly faster, 28% expect them to rise at a similar rate, 21% expect them to rise slightly slower, 16% expect them to rise significantly slower, and 5% expect wages to decline (Chart 3).
Selected Services Comments
“Less than a year ago we had to raise the pay for new hires by about 25%, which meant all the existing employee had to get bumped up as well.”
“We will need to increase starting wages to attract employees. The question is when and how much since the consumer is more price sensitive than in the past. All costs cannot be passed on the consumer.”
“Wages are being adjusted downward with contract renewals.”
“We currently pay near the top of the industry for the region and have outpaced inflation with pay increases and we anticipate similar pay increases.”
“We are not needing to raise wages significantly to attract or retain employees.”
“Attracting and keeping good employees is among the most important things.”