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Business Activity Rose Modestly

Tenth District services activity rose modestly in October, and expectations for future activity rebounded (Chart 1 & Table 1). Input price growth slowed somewhat this month, while selling prices inched higher.

The month-over-month services composite index was 5 in October, up from -2 in September and equal to 5 in August (Tables 1 & 2). The composite index is a weighted average of the revenue/sales, employment, and inventory indexes. Wholesale trade, professional, and business services saw the largest increases, while retail, restaurants, and tourism sectors declined. Revenues improved over last month, as the month-over-month index increased from -1 to 7. Employment jumped from -5 to 4, and the employee hours and wages and benefits indexes also rose. The year-over-year composite index increased from 4 to 9, as revenues and employment growth accelerated while access to credit declined. Capital expenditures growth edged up from 18 to 23. The composite expectations index for services activity rebounded from 7 to 14 after cooling somewhat last month.

Services Composite Indexes

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A time series chart from October 2023 to October 2024 showing the services composite diffusion index of activity versus a month ago and versus a year ago. The month-over-month composite index was 5 in October, up from -2 in September and equal to 5 in August. The year-over-year composite index ticked up from 4 to 9 in October.
Date Vs. a Month Ago Vs. a Year Ago
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
Jun-24 2 8
Jul-24 -4 3
Aug-24 5 10
Sep-24 -2 4
Oct-24 5 9

Special Questions

This month contacts were asked about demand and profit margin expectations. Most firms (47%) said their demand expectations were slightly higher for 2025 compared to 2024, while 31% expect no change, 14% expect them to be slightly lower, 6% indicated significantly higher, and 2% said significantly lower (Chart 2). Firms were also asked how profit margins compared to pre-pandemic levels, and how they expected them to change in 2025. 33% of firms reported slightly higher margins compared to pre-pandemic levels, while 29% reported slightly lower, 19% reported significantly lower, 12% no change, and 7% significantly higher (Chart 3). In addition, 35% of firms expected no change to margins in 2025, with 31% slightly lower, 25% slightly higher, 7% significantly lower, and 2% significantly higher.

Selected Services Comments

“Higher rates have positively affected idle funds earnings, which has offset increased capital acquisition cost.”

“We have good cash reserves. Interest rates are a consideration but not a major component of our decision-making processes.”

“I think the recent interest rate change was helpful, but I think a 3/4 % additional cut before December would be a huge gain for small business owners. I feel an additional rate decrease would lower our input prices and relieve some pressure on our commercial loan borrowing.”

“We are able to pass 100% of the increased cost of inputs from a material standpoint onto the customers, however, our increased labor costs have not been as easily passed onto customers. We have slowed down on capital expenditures related to growth and only been making the purchases that we deem necessary.”

“Lower grain prices have affected the purchasing power from farmers. Sales have dropped off over 30% and we do not see a rebound until prices come back up.”

Survey Data

Current Release

Historical Monthly Data

About the Services Survey

Authors

Chad Wilkerson

Senior Vice President and Oklahoma City Branch Executive

Chad Wilkerson serves as Oklahoma City Branch Executive and Senior Vice President for the Federal Reserve Bank of Kansas City. Wilkerson began his career with Federal Reserve in…

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Chase Farha

Research Associate

Chase Farha is a Research Associate in the Regional Affairs department at the Oklahoma City branch of the Federal Reserve Bank of Kansas City. In this role, his responsibilities…

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