Business Activity Increased Moderately in July
The month-over-month services composite index was 14 in July, up from 5 in June, and 10 in May (Tables 1 & 2). The composite index is a weighted average of the revenue/sales, employment, and inventory indexes. Activity in retail trade and transportation rose, while activity in the tourism sector fell. Most month-over-month indexes were positive except for the temporary and part-time employment, employee hours worked, and credit conditions indexes. The monthly general revenue/sales index rose from 3 to 19, and employment increased slightly from 1 to 4. The year-over-year composite index remained at 10, with both consumer and business services growing at about the same pace. The capital expenditures index ticked down from 18 to 16. Expectations for future activity in services remained elevated with a reading of 24, driven primarily by general revenue/sales.
Services Composite Indexes
Skip to data visualization table| Date | Vs. a Month Ago | Vs. a Year Ago |
|---|---|---|
| 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 |
| Mar-26 | 15 | 8 |
| Apr-26 | 3 | 8 |
| May-26 | 10 | 12 |
| Jun-26 | 5 | 10 |
| Jul-26 | 14 | 10 |
Composite Indexes vs. a Year Ago by Sector
Skip to data visualization table| Date | Consumer Services | Business Services |
|---|---|---|
| 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 |
| Mar-26 | 11 | 0 |
| Apr-26 | 9 | 6 |
| May-26 | 17 | 3 |
| Jun-26 | 9 | 12 |
| Jul-26 | 10 | 11 |
Special Questions
This month, contacts were asked special questions about profit margin changes and changes in demand expectations. Almost half (47%) of firms reported a slight decrease in profit margins from the beginning of the year, 13% reported a significant decrease, 22% reported no change, 13% reported a slight increase, and 5% reported a significant increase (Chart 3). Firms were also asked about changes in demand expectations for their products for the remainder of the year. Approximately half (48%) of firms expect demand to be slightly higher for the remainder of the year, 4% expect demand to be significantly higher, 21% expect demand to be unchanged, 21% expect demand to be slightly lower, and 6% expect demand to be significantly lower for the remainder of the year (Chart 4).
Selected Services Comments
”From a business-to-business standpoint, the economy is very strong. Margins are much better than 2024 and 2025.”
“Retailers are reluctant to lower their retail prices for economic reasons. Retailers will have to adjust their pricing accordingly to stay competitive”
“Consumers are just not spending money this year.”
“We have had to cut some technology due the increase in cost. Thus, we are having to do some of those tasks manually.”
“Oddly enough, we're seeing a slowdown in our traditional business.”
“We have been pleasantly surprised by our ability to maintain good sales. We have run a fairly aggressive marketing campaign the last 3 months & by partnering with our vendors, we have been able to have good success without having to expend a lot of resources.”
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
