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Texas service-sector activity accelerates, but concerns persist


A jump in retail sales helped boost the pace of Texas service-sector growth in March, but political uncertainties and sluggish demand in some parts of the state left managers with less optimistic business outlooks, according to a monthly report from the Federal Reserve Bank of Dallas.

The state revenue index, a key measure of activity among private, service-providing firms in Texas, nudged up to a reading of 15.2 in March from 14.1 the prior month, according to the Texas Service Sector Outlook Survey, which was released Tuesday. The greater, positive figure indicated that the sector’s expansion — now on an 88-month growth streak — accelerated slightly this month.

Some of that faster pace came from retailers across Texas. The state sales index, which measures retail activity, increased to 10.3 in March from 6.9 in February, according to the Texas Retail Outlook Survey, a subset of the broader survey.

The boost in retail sales prompted stores to increase hiring during the month, although a measure of hours worked suggested that workweeks contracted, the retail survey noted.

Hiring accelerated across the entire service sector, too. While retail payrolls have gone up and down in recent months, the sector as a whole has increased or maintained payrolls each month for more than seven years, according to the survey’s employment index.

Private service-providing companies account for about two-thirds of the state’s non-farm jobs, according to the Texas Workforce Commission. The same companies account for about 60 percent of the state’s economic output, according to the Dallas Fed.

Despite solid demand in March, managers reported less optimism in their current and future business outlooks. Measures of both company-specific and general business expectations dropped for retailers and the full sector, the reports noted.

In fact, outlooks for current, company-specific activity among retailers dropped sharply and returned to negative figures after four consecutive months of solidly optimistic reports.

Those outlooks appeared to reflect the economic and political uncertainties that managers expressed in a set of anonymous comments compiled in the reports. Demand and business growth were mixed across different industries, and at times across different firms in the same industry — the latter likely reflecting the disparate impact of the energy sector’s slowdown on different parts of the state.

More consistent were the hopes and concerns about the federal regulatory and political environment. Several managers expressed their optimism that a Republican Congress and White House would ease regulations on businesses.

A smaller number expressed concerns about the potential border tax and immigration restrictions proposed by President Donald Trump, as well as the Muslim travel ban. One firm noted a slowdown in U.S. travel due to the orders, saying “a wider message has been sent to global businesses and travelers that the U.S. is becoming increasingly more difficult to work with.”

Yet most of the concerns centered on longstanding issues, such as the state of the Texas oil and gas industry and political unknowns.

“With so much uncertainty about this current administration and what they are actually about, I feel this is beginning to have a negative impact on customers’ outlooks,” said one manager in the accommodations industry. “I don’t even know what to believe these days regarding what is coming out of Washington.”



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