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First Cut: Dallas Fed’s service sector conditions take a turn higher in November

The general business conditions index in the Dallas Fed’s Texas Service Sector Outlook for November was 4.7, up from 1.8 in October. The six-month conditions index was up to 8.5 in November from 0.2 in October. The improvement in both preset and future conditions can be attributed to a decline in uncertainty. In spite of slower growth, the resilient US economy appears set to add to its 125 months of expansion.

The report details were somewhat weaker than the prior month, but overall were consistent with mild growth. The revenues index was at 12.2 in November after 15.4 in October, not out of line with most of 2019 to-date. Employment was down a bit to 7.0 after 9.1 in the prior month, but the reading was also in line with the tone for 2019. Part-time employment was at -2.2 for November, its first negative since -0.2 in January when the government shutdown affected many businesses’ plans to add workers. Hours worked expanded a bit faster at 2.9 in November after 1.7 in October, but are still quite slow. Wages and benefits grew at 16.2 in November, a step down from the 19.9 in October but not much different from the underlying trend for 2019.

Input prices were essentially unchanged at 24.7 in November after 24.5 in October. Selling prices managed to expand narrowly at 0.7 after -1.0 in October. Pricing power was restrained even if input costs were rising modestly.

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