Dallas Fed services sector outlook index -7.7 vs -0.1 prior

• Prior was -0.1
• Revenue index +8.7 vs +7.7 prior
• Employment +0.6 vs -0.2 prior
• Company outlook -3.1 vs +1.0 prior
• Six month index +12.4 vs +20.5 prior

Comments in the report:

Utilities

• I feel that a recession is going to hit the U.S.

Warehousing and storage

• Things are relatively stable, prices increasing but not at such a rapid pace that we have any undue concerns.

Publishing industries (except internet)

• Our data supports the thesis that consumer spending is
  paring back materially. We will start seeing significant negative
  impacts to our business if spending continues to decline at the current
  rate through the end of the year. We are very concerned that the
  Federal Reserve has waited too long to trim rates and that by the time
  any future cuts begin impacting the economy, consumer spending will be
  at recession levels.
• We are looking forward to some modest cooling expected on compensation increases and some purchasing budgets.

Data processing, hosting and related services

• Costs continue to rise while pressure from customers and prospects to decrease prices is continually increasing.

Credit intermediation and related activities

• The economy is subject to fluctuating market changes caused
  by anticipated interest rate variations and political instability. Loan
  activity is slowly improving, but liquidity is continuing to be a
  challenge with competition for deposits remaining active.
• The Federal Reserve lowering rates will decrease our cost of funds immediately.

Securities, commodity contracts and other financial investments and related activities

• Farm and cattle incomes are up this year. Oil and gas activity and tourism have slowed.
• The amount of political noise is disruptive to business
  owners. Political ads are proliferating, providing little value and
  worrying business owners.
• Activity is stalled slightly due to increasing personal debt along with [interest] rate uncertainty.

Insurance carriers and related activities

• New projects and new home purchase customers (for insurance) seem to have slowed somewhat.

Real estate

• As stress percolates through the multifamily real estate
  industry, we see litigation increasing. Desperate owners and suppliers
  are filing absurd suits against anyone they think they can blame or
  collect from.
• Anticipated lower interest rates will certainly improve the outlook for commercial real estate investments heading into 2025.
• I feel that the election will dampen activity until after
  the inauguration, at which time things will pick back up, barring no
  major problems with the election.

Rental and leasing services

• We are a large, heavy equipment distributor in Texas,
  Oklahoma and New Mexico At the end of July we were down 6.3 percent.
  That decline in this year versus last year has been consistently
  increasingly throughout the year. We were only down 10 percent during
  the pandemic of 2020, and we average 10.7 percent increase in sales per
  year over 65 years. So, this year’s decline is unusual for us and is
  unsettling! People are out of money. They’re parking their cars and
  throwing their keys to the dealership or banker, as it’s car or food
  for the family. And worst of all, I think it has just begun.
• Hiring has become easier. Importing our equipment has become
  easier. We don’t import directly, but our rental equipment is
  manufactured in Korea, and we buy from the importer. Tariffs on Korea
  would really foul us up if that happened next year. We would have to
  pass on those costs to our customers, which would inflate our prices in
  proportion to the tariff.

Professional, scientific and technical services

• It’s curious that news headlines say inflation is going
  down, but in the design and construction industry, we have not seen
  prices going down. In fact, they’re going up. For example, a door that
  cost $3,000 a year or so ago is now pricing in at $10,000. There is
  less competition in the market. There are fewer local companies. Many
  have closed due to difficulty in maintaining a workforce and owners
  close to retirement. Others have sold out. There are still long lead
  times for items such as transformations and generators.
• From 2022 we are down 40 percent. We only sold two building
  permit expediting jobs last month. In July of 2022, we sold over 30.
  New construction is dwindling. This is much worse than during the Great
  Recession.
• It seems like everyone is pretty sure about the way the
  election and the economy are going. We are not seeing the uncertainty
  that we normally see in the third quarter of a presidential election
  year. Our biggest problem is finding qualified engineers. We could grow
  our business a lot if we could find the right people.
• Understanding that the psychology of people and the market
  is a major driver of the economy, the upcoming election will determine
  the course of American business for the next four years. Honestly, I do
  not think this economy can withstand the ravages of what it has
  experienced since 2021.
• As interest rates remain high, the overall real estate
  market continues to retract. Orders for both commercial and residential
  transactions have continued to decline, and we feel the market will not
  recover until interest rates decrease.
• We are seeing a little increase in real estate and finance transactions
• The market and the economy are top priorities.
• The cost of health care and liability insurance is significantly affecting our business outlook.
• We continue to get business inquiries and new contracts,
  though we are experiencing a delay in accounts receivable. We are
  spending more time trying to get some clients to pay. They are paying
  eventually, but it is taking longer.
• We continue to see delays in purchase decisions. We have
  come to the conclusion that some of it may be due to a fractured
  decision-making process within our clients’ firms. While a decision was
  made in a group setting previously, with more distributed workers,
  these conversations are now a series of one-on-one conversations. These
  conversations take quite a bit of additional time and in each
  conversation, they can decide to delay or cancel a project, but all
  conversations must be positive for approval.

Administrative and support services

• The biggest issue keeping companies from doing much, in my opinion, is politics.
• We cannot hire in the wage bracket we compete in.
• As a search and staffing firm in the business of hiring not
  only in North Texas but across Texas and the U.S., we have felt like we
  are in a recession now for months. Senior vice presidents of talent
  acquisition at 40,000 employee businesses have told us confidentially
  they are not backfilling roles when existing employees leave the
  company. Fortune 100 clients have put hiring freezes in place.
  Mid-market companies are posting fake jobs to pipeline candidates for
  when they can hire again, as they are not allowed to fill the roles
  they are posting. Clients are taking longer to pay their invoices, and
  the few who are hiring are taking longer to make decisions. I have
  eliminated one position already and am reducing the wages of the staff I
  have left. Please lower interest rates. I’m very worried you are
  already too late. But we have to try to get the economy back on track.
• We are concerned about interest rates and their impact on
  real estate and general business activity. Financial performance
  remains strong for those companies not heavily leveraged.

Educational services

• Higher education enrollment patterns in Texas are finally
  starting to incorporate national trends, with declines in undergraduate
  student populations. Although it is early, we expect this decline is
  likely to increase, creating higher uncertainty and reduced revenue in
  the coming year.

Ambulatory health care services

• Customers are having difficulty coming up with funds to pay for our services.
• One opines that interest rates a bit too high.
  Many borrowers in pain and let out a sigh.
  We plead with grace
  Bring rates to a place
  Where capital formation does not result in a cry!

Texas Retail Outlook Survey

Amusement, gambling and recreation industries

• Weather has been the real negative factor for our business.

Accommodation

• In my 15 years at this location, this summer has been the
  worst business period I have seen in my area (not including COVID).
  Several factors are contributing to this including construction around
  the area and lack of group business in the market.

Food services and drinking places

• Revenue struggles continue mostly due to poor
  back-to-office reality compared to reports of improved office occupancy.
  Same for business travel Monday through Thursday. Also, there are
  clear signs of customers pulling back spending due to our increased
  prices necessitated by continuing increases in COGS [cost of goods
  sold] price and wage pressures.
• The rise in utility bills, insurance and property taxes, plus the fear of recession, are changing my customers’ buying habits.

Merchant wholesalers, durable goods

• So much depends on the election and what happens after that!

Motor vehicle and parts dealers

• The sales price per new and used vehicle sold has not
  changed. However, the volume has increased substantially. With the
  possibility of lower interest rates, we are optimistic for increased
  unit volumes over the next six months.
• Auto sales continue to soften on new vehicles and used vehicles.
• August has been very soft, even more than usual. Back to school usually sees us slow down some, but not at the current level.

Food services and drinking places

• A softening in credit terms is resulting in renewed expansion
  planning as the company looks to new markets and measured expansion in
  existing markets. The supply of labor seems to have increased, leading
  to slightly longer employment terms and reduced turnover. Enormous
  fiscal irresponsibility at the federal level is a continuing concern
  and will continue to temper leverage and growth.

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