According to a recent monthly survey conducted by the Federal Reserve Bank of Kansas City, services activity in the middle of the U.S. saw a slight decrease in growth during October. However, there is an optimistic outlook for future activity.
Composite Index Shows Slower Growth
The composite index of the Tenth District Services Survey, which combines measures of revenue/sales, employment, and inventory, recorded a score of minus 1 in October. This is down from a score of 2 in September and remains consistent with the previous month's reading of minus 1. A score above zero indicates expansion, while a score below zero signifies contraction.
Revenue Growth in Select Industries
Although wholesale and retail trade, autos, and healthcare experienced declines in revenue, there was an increase noted in transportation, real estate, and tourism sectors during October.
Input Costs Outpace Selling Prices
Another notable finding from the survey is that input cost increases continue to surpass selling prices. This trend implies potential challenges for profitability among service businesses in the region.
Expectations for Future Activity Improve
On a positive note, the survey reveals that firms surveyed expressed growing optimism about revenue for the next six months. The index of expectations for future services activity rose to 7 in October, up from 3 in September and 4 in August.
Wide Range of Service Industries Included
The Kansas City Fed's survey incorporates participants from various service industries, including retail and wholesale trade, automobile dealers, real estate, and restaurants. This diverse range of sectors provides valuable insights into current services activity in the Tenth District.
Outlook for Manufacturing Activity
In addition to the services survey, the bank also released its monthly manufacturing survey. It showed that factory activity in the central U.S. declined for the second consecutive month in October, while expectations for future activity remained steady.