Texas service businesses report growth again in October, but wage pressure hits its highest reading since early 2023

Service businesses across Texas, the category that takes in retailers, restaurants, health care and professional firms, picked back up in October after a month of stalling, the Federal Reserve Bank of Dallas reported Tuesday, Oct. 27.

The bank's Texas Service Sector Outlook Survey found its revenue index rose about five points to 4.4. A reading above zero means more firms reported an increase than a decrease. In September the same index was slightly negative.

Executives' views of the wider economy also brightened. The general business activity index moved to 4.0 from -1.8, and the company outlook index climbed to 3.0 from -3.2. A gauge of how uncertain firms feel about the outlook fell five points to 16.3.

Costs and pay still climbing

Price pressure did not ease. The input prices index held at 41.7, compared with a long-run average of 28.0 for the series, and the selling prices index edged up to 18.2 against a 7.5 average.

Pay is rising faster too. The wages and benefits index rose to 20.5, the highest reading since January 2023, according to the Dallas Fed.

Hiring was steady: the employment index registered 2.8 and part-time employment 2.6, both little changed, while hours worked edged up to 2.2.

Looking six months out

Firms were more upbeat about the coming months. The index for expected revenue rose to 43.6, and expected general business activity jumped to 19.6 from 10.7.

Comments the bank published from respondents, who are not named, pointed to energy costs and national uncertainty. "High prices are slowing sales of new vehicles," one auto dealer wrote.

A nonstore retailer that sells propane, gasoline and diesel said fuel price swings tied to Russia and Iran were raising its costs and that a buyer had backed out of a deal for land meant for a housing development. A professional services firm said the midterm elections and the Iran war had created uncertainty it expects to pass by the second quarter of next year.

The survey was collected Oct. 13-21; 224 of the 342 executives contacted responded. The Dallas Fed stopped publishing a separate retail survey in January 2026 and now folds retail into this report. The next release is Dec. 1.

Sources

dallasfed.org