Business Activity Increased Further in February
The month-over-month services composite index was 6 in February, up from 2 in January, and 1 in December (Tables 1 & 2). The composite index is a weighted average of the revenue/sales, employment, and inventory indexes. Activity in the auto services and information services sectors fell, while the tourism sector grew moderately. Most month-over-month indexes were positive except for employment, which declined from –3 to -5. The monthly general revenue/sales index grew further from 7 to 15, its highest reading since June 2023. The year over-year composite index decreased slightly from 19 to 11, as growth in consumer services eased, and the capital expenditures index fell from 8 to 2. Expectations for future activity in the services sector remained expansionary, but expectations for revenue growth cooled somewhat from last month.
Services Composite Indexes
Skip to data visualization table| Date | Vs. a Month Ago | Vs. a Year Ago |
|---|---|---|
| Feb-25 | 1 | 6 |
| Mar-25 | 0 | 2 |
| Apr-25 | 2 | 11 |
| May-25 | 8 | 8 |
| Jun-25 | 2 | 11 |
| Jul-25 | -3 | 1 |
| Aug-25 | 3 | 12 |
| Sep-25 | -6 | 3 |
| Oct-25 | -4 | 8 |
| Nov-25 | -6 | 6 |
| Dec-25 | 1 | -1 |
| Jan-26 | 2 | 19 |
| Feb-26 | 6 | 11 |
Composite Indexes vs. a Year Ago by Sector
Skip to data visualization table| Date | Consumer Services | Business Services |
|---|---|---|
| Feb-25 | 1 | 14 |
| Mar-25 | 1 | 4 |
| Apr-25 | 10 | 12 |
| May-25 | 9 | 5 |
| Jun-25 | 8 | 17 |
| Jul-25 | -7 | 17 |
| Aug-25 | 14 | 7 |
| Sep-25 | 6 | -3 |
| Oct-25 | 20 | -15 |
| Nov-25 | 11 | -5 |
| Dec-25 | 1 | -2 |
| Jan-26 | 22 | 10 |
| Feb-26 | 12 | 11 |
Special Questions
This month, contacts were asked special questions about price pass through abilities and price changes. Almost half of firms (45%) responded that they are currently able to pass through 0 20% of higher costs from inputs and labor, 9% of firms are able to pass through 20-40%, 13% are able to pass through 40-60%, 4% can pass through 60-80%, 20% can pass through 80-100%, and 1% of firms had to decrease prices. One-fifth of firms responded that they will be able to pass through 80-100% of higher costs in the next 12 months, 43% of firms will be able to pass through 0-20%, 12% will be able to pass through 20-40%, 11% will pass through 40-60%, 6% will pass through 60-80%, 2% will be able to pass through more than 100%, and 6% of firms had to decrease prices (Chart 3). Firms were also asked about price changes compared to last year. Approximately half of firms (49%) reported no change in the frequency of price changes compared with last year, 9% reported they are changing their prices much more often than last year, 32% are changing somewhat more often, 9% are changing somewhat less often, and 1% of firms are changing prices much less often (Chart 4).
Selected Services Comments
“Labor market is tightening.”
“Starting to utilize robotics and AI to be more productive.”
“It is still rough and choppy.”
“We have had to lay off people to offset the increase in prices for the technology we use.”
“Labor continues to be a governor on growth for our services.”
“Demand far outpaces product availability and our ability to take advantage of the opportunities. We've had to turn business away.”
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.