US March Dallas Fed services sector outlook -5.5 vs -3.9 prior

• Service sector outlook -5.5 vs -3.9 prior
• Revenue +4.0 vs +5.2 prior

Comments:

Utilities

• General business activity has picked up.

Specialty trade contractors

• We are seeing a slowdown in capital expenditures for existing real estate buildings.

Personal and laundry services

• We were forced to raise prices 7 percent this month because labor expense is too high.

Support activities for transportation

• The elections are still a variable that keeps the uncertainty high.
• The general level of business activity is healthy, but current growth is dismal.

Warehousing and storage

• Relatively stable at the moment, tentatively watching prices tick back up.

Securities, commodity contracts and other financial investments and related activities

• Our company has already laid off all nonessential staff. There
  is no liquidity in the market, no ability to get debt. Fear of a
  recession continues to dominate, and the Federal Reserve is hesitant to
  signal rate cuts.

Insurance carriers and related activities

• We are hiring new support people for our sales and brokerage business.
• The property insurance industry has become very tough here in
  Texas, especially in 2024. Rapidly increasing premium rates plus higher
  deductibles are being applied to all homeowners, residential and
  commercial property owners. It’s very tough to find affordable terms,
  and many insurance companies are restricting what they offer. It’s a
  very serious issue that doesn’t appear to be addressed on any
  governmental level.

Real estate

• The level of transaction activity in commercial real estate
  (sales, financing, new development pursuits) is anticipated to increase
  in the second half of the year, as soon as the Federal Reserve starts
  reducing rates.
• The political rhetoric and upcoming elections will continue to
  ramp up through the year, and the closer we get to the elections, the
  more uncertainty and pessimism will grow and dampen consumer sentiment,
  which is very important to our business.

Rental and leasing services

• We are curtailing business investment due to high interest rates.

Credit intermediation and related activities

• The unmitigated volume of additional regulations promoted by
  this administration is creating a burden that has and will continue to
  negatively impact the consumer. The upcoming election could be a
  critical turning point for our country’s future and community banking.
  Inflation is now having obvious impacts on some subsets in the economy,
  and as consumer debt continues to grow, the money volume slows down and
  we draw closer to a potential recession, there are concerns and the
  possibility of long-term negative consequences.

Religious, grantmaking, civic, professional and similar organizations

• American enterprises need relief. There’s a forming perfect storm that creates a dangerous paralysis.

Professional, scientific and technical services

• The labor market seems to be loosening up a small bit. Things
  seem to be slowing down. Most developers are finishing up projects
  already started but not yet looking for another project. The multifamily
  and industrial sectors seem to still be moving forward. House sales are
  not moving at all in the higher-priced homes. Rent-to-own is a growing
  concept. Rising costs still put pressure on profit margins.
• We see a slow start to client spending this year.
• The business climate has slowed. There is uncertainty regarding
  the general economy, inflation, interest rates and the presidential
  race. We are somewhat pessimistic for the remainder of 2024.
• Buyers seem paralyzed by a lack of visibility into the future.
  We work with companies looking for talent. Although unemployment is
  relatively low and many companies are looking for the right talent,
  activity didn’t increase this year until late February. Many of these
  companies have had open positions for a while, but it seems they are
  ready to get them filled because they know they need the right people to
  grow their companies.
• The number of employees has decreased because of attrition. We are looking for replacements.
• We’ve had a slight uptick in billable hours, and revenue is better year to date.
• While inflation may be propping up the economy some, we are
  still amazed that the economy has been so resilient, given the many
  headwinds it is facing.
• Costs are continuing to increase, and borrowing is getting more
  complex. New government rules keep piling on, harming us as a small
  business and making it more costly to operate.
• Although we have seen an increase in real estate orders the past
  month, the general level of business activity still remains sluggish.
  We don’t see this changing until the regional banks’ liquidity issues
  get resolved and we have a better understanding of where the interest
  rates are going to settle.
• Our business in the Asian and U.S. markets is growing.
• Our outlook has increased primarily due to our internal efforts and investment in sales and marketing activities.
• Most businesses in our category will continue to assess market
  data and the potential for a modest rate cut before fully committing to
  any sort of accelerated growth. Employee wage increases and other
  associated costs (insurance, workers’ compensation) and the recent
  Department of Labor rule changes will impact growth.
• Indications are that there is a slowdown on the horizon, yet
  expenses are rising, including wages and benefits. Productivity in
  general is down significantly. People don’t seem to want to work, and
  new hires need a lot of training.
• We have the fewest zoning cases for new multifamily dating back
  to before the Great Recession. Overall activity is low, as are filings
  across the board at the City of Dallas. If things are not in the
  pipeline now, the construction sector will feel this pain in 2025 and
  beyond. This is by far worse than during the pandemic. Dallas County is
  not a low-cost place to do business.
• The position we are intending to add is one that we have needed
  to add for many months. We’re hoping to find an engineer. If we had more
  confidence in the market, we would probably add two or three positions.
  Right now, we feel that the third and fourth quarters are going to be
  weak. Some of this is due to uncertainty with the election. Some of our
  worries stem from strength of the economy.

Management of companies and enterprises

• Election years are always turbulent.
• Way too many regulations. Many regulations do nothing but confuse our customers.
• Higher interest rates have significantly slowed demand for
  credit and loans. This translates into slower growth and lessened
  capital expenditures for our clients. Consumers are beginning to show
  effects of higher borrowing rates and inflation pressures, with
  increasing past-due loan payments and growing consumer debt.

Administrative and support services

• General economic indicators remain strong. Client activity is
  positive and improving. Staffing skilled positions remains challenging.

Accommodation

• Business in the last six weeks has softened. We are in one of
  our traditionally busiest periods, and we are experiencing a 10 to 15
  percent decrease in business demand.

Merchant wholesalers, nondurable goods

• Sales are starting to pick up. From September 2023 to the end of
  January 2024, sales were down relative to historical expectations, but
  February and March seem to be normalizing against historical averages.
  In discussions with other industry folks, the consensus is that the
  consumer now has the cost of inflation baked into their budget, so
  restaurant spending appears to be coming back.

Merchant wholesalers, durable goods

• We are seeing some pressure from a national and global slowdown
  in West Texas, but it is being counteracted by an increase in oil
  prices. We believe overall the price of oil will outweigh the negative
  pressure from a national slowdown. There is not a clear winner right
  now, but the two combatting sides are making our forecast very unclear
  and unpredictable.

Health and personal care stores

• Inflation is hurting our business. People cannot afford to buy
  the products they did before. We have many requests to fill smaller
  quantities of medications. Prices everywhere are too high.

Building material and garden equipment and supplies dealers

• We think rates are still too high. Our company profits are still 35 percent lower than three years ago.

Electronics and appliance stores

• A shakeout of the weak retailer is looming. Fixed costs are not able to be passed on in this environment.

Motor vehicle and parts dealers

• First quarter of 2024 will be more challenging than the prior
  year. January was a very soft market, February rebounded somewhat, and
  March is mixed. Volume is up, but margins shrink. Inventories are too
  high, and cost-to-carry at today’s high interest rates creates double
  trouble. Grosses are down, expenses up, profits declining.
• New vehicle inventories are increasing at a dramatic rate, raising the cost of inventory financing considerably.

Food services and drinking places

• Return to office and soft business travel continue to impact
  customer demand. Our cost of food and beverage continues to increase,
  although slightly slower. It’s the same for labor, not as much pressure
  to increase wages although continuing inflation is hurting our
  employees. Increases in selling prices may well be contributing to soft
  customer demand as well.
• Many new restaurants are opening in Houston. We are oversupplied.
  We expect many to close. Prices and wages are still high; guests are
  pushing back. New restaurants are busy; older ones not so much. Rents
  are still high but not really sustainable. It’s not a good time in our
  industry.

This article was written by Adam Button at www.forexlive.com.