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First Cut: Richmond Fed service sector revenues down in August, six month expectations soften as well

The Richmond Fed’s Survey of the Service Sector showed current revenues were down in August to an index reading of 6 after 11 in July. Revenues have been uneven since late 2018, buffeted by an economic slowdown, then the partial federal government shutdown, then increased uncertainty related to trade policy. Expansion remains in place, but with less vigor.

The index for expected revenues fell to 28 in August after 33 in July and was the lowest since 25 in January when the government shutdown fogged up the future picture. Excluding that outlier, the August reading is the lowest since 26 in November 2016 and points to anticipation of only mildly expansionary conditions.

Employment in the region’s service sector remained steady, if lackluster. The employment index was steady at 9 in August from July, but well below the 29 in June. Nonetheless, wage gains improved at 28 from 21, and the number of workers with available skills remained low at -12 after -15. If hiring has leveled off, the workweek has expanded for those already employed. The index for the average workweek rose to 14 in August after 4 in July and was the highest since 16 in September 2018.

Service industries are facing a similar situation as manufacturing in terms of prices. The Richmond prices paid index was down to 2.98 in August after 3.12 in the prior month with a retreat in energy costs. Prices received fell to 1.57 to 2.50, reflecting less pricing power on the part of businesses.

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