Dallas Fed service sector revenue +1.9 vs +6.7 prior

• Prior was -12.1
• Employment +1.8 vs +3.9 prior
• Overall outlook -4.1 vs -12.1 prior
• Company outlook -1.3 vs -5.7 prior
• Input prices +20.7 vs +24.7 prior
• Selling prices +3.8 vs +3.9 prior

There’s a clear trend in services inflation here.

The amount of comments in the report about politics are worrisome. The reality is that the White House has zero effect on +95% of consumer spending decisions or businesses, yet people are addicted to this crazy cycle and want to pretend that it does.

Comments in the report:

Merchant wholesalers, durable goods

• The oil and gas markets are slowing slightly. This
  could be just a slowdown during the final time of the election, but
  that cannot be determined at this time. Federal Reserve monetary policy
  actions have also slowed many of the mergers and acquisitions in the
  oil and gas markets. Many of the major companies in the Permian Basin
  are involved, directly or indirectly, in mergers and acquisitions
  affected by the Securities and Exchange Commission’s regulations.

Support activities for transportation

• We are seeing a seasonal uptick in market activity and
  rates. This is good, since our industry lost a measure of seasonality
  since the pandemic. It indicates a movement back toward normal for our
  market. However, there is still too much capacity in the market.

Warehousing and storage

• We have seen a pickup in business, particularly on the
  export side, over the past six weeks that has pointed to a recovery
  over the first four months of the year, when there seemed to be some
  uncertainty in the air.

Publishing industries (except internet)

• There is an increase in interest for advanced tech
  software and related platforms for education and general task
  automation with better quality and productivity than humans can provide.

Credit intermediation and related activities

• The economic environment is maintaining a sluggish
  pace, and part of the challenges for retail and consumer markets relate
  to high interest rates and inflation. Rural markets seem to be affected
  the most as evident from a slowdown in home and land sales. The
  sales-tax receipts have gradually declined monthly and are below the
  previous year-to-date amount.

Real estate

• People are adjusting to new economic realities. Few
  are expecting salary increases and are instead making lifestyle
  adjustments to deal with higher living costs. Reality is also setting
  in for the apartment owners we serve. They understand rents aren’t going
  up and interest rates aren’t coming down. As rate caps expire and
  loans mature, lenders are having to adapt as well. Ultimately, a lot of
  private equity (much in the form of individual retirement savings put
  into syndications) is getting wiped out.
• We need a rate cut before we will see any revenue improvement from home sales.
• Lower interest rates in the second half of the year
  should improve capital market conditions in commercial real estate,
  both for equity and debt.

Rental and leasing services

• Please note that our business is highly seasonal since we provide HVAC rental equipment. Overall, our business is going great.
• After five months, we are down 5 percent compared with
  2023. We are a company that has grown over 20 percent per year for the
  last three years, and we take this as evidence that the overall economy
  has slowed down this year. As a result, we have implemented a freeze on
  hiring and expenses.

Professional, scientific and technical services

• It feels like things might be bottoming out as demand has improved slightly.
• We are unwilling to commit additional growth capital
  expenditures until after the election, when the regulatory outlook
  should be clearer.
• We’re seeing pricing pressure from our competitors. It
  looks like they are getting slower and starting to lower their prices.
  We will eventually feel this pressure also, but not yet. Our biggest
  concern is the uncertainty from the election. Our third and fourth
  quarters might get slow if the election gets too bad. Our clients will
  start to put projects on hold.
• General business activity has slowed over the past
  couple of months. Although our real estate orders have increased
  slightly over the past couple of months, these deals are becoming more
  difficult to close due to the complexity and the lending environment.
  Hopefully the next round of numbers will start showing how slow the
  economy really is.
• This is a period of apparent stability covered with a veil of high uncertainty.
• The Federal Reserve’s recent announcement of no rate
  cuts in the near future is concerning regarding the immediate and lag
  effect it could have on the local economy. We have received direct
  feedback from many of our clients in various industries, and they are
  increasingly concerned. They are freezing hires and spending, with many
  reducing spending. The primary reason is the economic stagnation
  locally and nationally affecting their businesses.
• While we are obtaining a small amount of work for June, longer term it is not clear how much future work this will evolve to.
• After a yearlong search, we finally found a highly
  qualified consultant to fill our open search. We are still in growth
  mode and in need of a part-time administrative position; however, we
  wanted to be sure the revenue would be there. Our pipeline has
  certainly gotten deeper and wider, but some of that work won’t come to
  fruition until 2025.
• With the higher cost of goods and economic
  uncertainty, we are seeing clients lower their monthly retainers and
  new business opportunities have slowed significantly.

Administrative and support services

• High interest rates are still the major issue.
• As elections draw near, the political environment worsens, creating more uncertainty in our business.
• We remain uncertain about the last two quarters of
  2024. Although hiring is picking up slightly, clients still take longer
  to make decisions than in the past, and it remains difficult to find
  qualified candidates. We’re seeing an increase in hiring for skill sets
  we have not seen in several months, including human resources and
  marketing roles. Accounting, finance and sales roles continue to be in
  demand, but other roles are now appearing, which is positive.
• The corporate aviation sector has slowed down this
  month, which is consistent with our normal cycle. Requests for quotes
  in the commercial aviation sector have decreased for the third month in
  a row. Requests for quotes in the industrial machine shop have stayed
  low for the past four months.

Educational services

• Outlook and uncertainty levels have changed since last
  month due to election uncertainty, a change in institutional
  leadership and fluctuations in high school enrollment levels and
  business in- and outmigration in Texas.

Ambulatory health care services

• Wage and supply costs continue to rise with no
  improvement of insurance reimbursement or ability to raise self-pay
  pricing. There has been a shift in the labor market, and we believe it
  has shifted toward a buyer’s or employer’s market, with more qualified
  candidates available to work and requesting more reasonable wages.

Texas Retail Outlook Survey

Accommodation

• In general, our summer is beginning soft, with no signs this will change in the next two months.
• The storms in Houston played a large part in the
  increase in revenue. We were sold out multiple days and had an increase
  in occupancy.

Food services and drinking places

• We feel inflation and fear of more inflation plus the
  rise in cost of living are holding consumers back. Hopefully we will
  adapt to the new realities soon.
• June and July are awful months. Our clients are on vacation, no one is in the office and there’s less dining out.
• We have seen some pushback on menu prices; however, customer counts continue to increase slightly.

Merchant wholesalers, durable goods

• Customers are concerned about the election, so they are holding off on large purchases.

Merchant wholesalers, nondurable goods

• Fuel prices seem to have stabilized, which helps us
  stabilize pricing (no change to fuel surcharges). However, oil prices
  increased over the last 30 days, and fuel surcharges are typically
  adjusted as a 30-day historical average. If oil stays high, we expect
  fuel surcharges to increase in July.

Motor vehicle and parts dealers

• Inventories continue to swell, and interest rates
  remain high. Our grosses are off, and margins continue to decline.
  Profits are down 20 percent from the prior year.
• We continue to be surprised at how vehicle sales volume continues to be strong in spite of interest rates.
• Affordability has become an ever-increasing problem
  for new car dealers. The price increases of new cars combined with
  higher interest rates have put new cars out of reach for more and more
  people.
• The economy is slowing. The consumer is more cautious and more reluctant to purchase at higher prices and payments.

Electronics and appliance stores

• The lack of building activity is shutting down the appliance industry.

Building material and garden equipment and supplies dealers

• Poor national leadership and lack of confidence have eroded the business environment.

Nonstore retailers

• Our outlook depends heavily on the presidential election.

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