Business Activity Expanded Again in August

Tenth District services activity expanded again in August, but was still much lower than a year ago, while expectations for future activity rebounded (Chart 1 & Table 1). The indexes for input and selling prices increased at a faster pace in August. Firms expected input and selling prices to rise further over the next six months.

The month-over-month services composite index was 20 in August, unchanged from 20 in July, and up significantly from 3 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 similar in August to the postings from July. The general revenue and sales index was still high, driven by increased activity for wholesale, transportation, real estate, restaurants, tourism and hotels, while retail activity declined slightly. The indexes for employee hours, part-time employment, wages and benefits, and capital expenditures expanded at a faster pace in August, and the employment index remained positive. On the other hand, the month-over-month indexes for inventories and credit conditions decreased again in August. In addition, most year-over-year indexes declined further in August, and the year-over-year composite index dipped from -20 to -24. However, the year-over-year index for capital expenditures rose into positive territory for the first time since February. Expectations for future services activity rebounded in August, and the composite index grew from -2 to 11.

Composite Index vs. a Month Ago

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Date Composite
19-Aug 18
19-Sep 13
19-Oct -4
19-Nov 9
19-Dec 15
Jan-20 14
Feb-20 6
Mar-20 -16
Apr-20 -58
May-20 -21
Jun-20 3
Jul-20 20
Aug-20 20

Special questions

This month contacts were asked special questions about the impact of government stimulus and unemployment benefits. Nearly 75% of contacts reported that government stimulus programs positively contributed to their business’s performance in the past three months (Chart 2). A number of firms noted the Paycheck Protection Program (PPP) loans helped cover cash flow and retain staff, and 44% of firms indicated their business outlook was dependent on additional government support. Around 60% of contacts indicated the CARES Act extra $600/week or recent $400/week boost in unemployment benefits created some or significant difficulties in bringing furloughed or laid-off employees back to work (Chart 3). 40% of businesses reported difficulty sourcing inputs, such as materials or employees.

Selected Services comments

“Significant concern about new government taxes and regulation with the new Administration.”

“Clarity from the government on numerous rumored policy changes is needed. Until that comes, hiring and capital investment decisions will be deferred.”

“We are encouraged that the vaccine roll-out will lead to reopening our economy and getting people back to work.”

“We are expecting an uptick in overall activity in the 3rd and 4th quarters and may adjust head count upwards to accomplish this.”

“We are hoping that the COVID-19 vaccine will encourage more people to go back to work.”

“Once the vaccine is prevalent and employees/candidates are less fearful to be among the public we expect to have additional applicants and increase in business.”

“Sadly, about half the employees aren't going to get vaccinated unless made to do it.”

“Families still wary to dine out.”

“I will not open my dining rooms until there is a larger base of population vaccinated in order to protect my employees.”

“The demand for market-rate and affordable housing is extraordinary.”

“We are a regional company. We need to be able to travel. We expect the vaccine to make that more available.”

“Our business is done by meeting people in person for lunch, meetings, etc. Zoom and TEAMS help but are not a 100% capture of what we do.”

“We are in a wait and see period. We are reluctant to make any future plans for our business until we are comfortable that the economy will rebound, and consumer confidence is on the rise.”

Survey Data

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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…