Texas Service Industries Also Feeling Sting from Oil Price Crash
News Article by Questco
“Oil prices are increasingly impacting our business. An increasing number of customers are delaying or canceling purchases,” said an executive for a vehicle parts dealer. “We are not in a desperate situation but are measurably affected.”
The Fed’s activity index, which is compiled from the answers given by business owners to a monthly survey, fell to 10 points in January from 15.2 in December, an indication that while the sector saw growth, the rate slowed this month.
Even though the Texas service sector continued to grow in 2015, according to the Fed, activity has been down significantly from before oil prices began falling in the middle of 2014 — the peak for the index that year was 28.9, but in no month in 2015 did the index rise above 20. That score shows that a growing number of service executives saw bleaker prospects for doing business in Texas.
Other Fed indexes tracking pesimissm from business owners also showed gloomier outlooks among their responses. The general business activity index, which broadly measures the perception of economic conditions, plummeted from 12 points in December to -10.4 last month.
And the company outlook index fell into negative territory, to -5.8. More than 20 percent of the respondents to that question indicated that they saw activity retreating in the coming months.
“Both [the oil and gas] sectors have seen their selling prices decline 70 percent in the last year. This morning’s forecast says prices could fall another 10 percent,” said an executive with a financial services firm. “We are adjusting to customer demand for operating equipment, which has decreased to match the selling prices of their products.”
A commercial real estate executive noted that activity in the Houston market had contracted because of oil prices, while other cities in Texas that are not as dependent on the energy industry — Dallas-Fort Worth, Austin and San Antonio — remained strong.
“The Houston business market will continue to be impacted by the low price of oil, which reduces growth in our business,” a telecommunications industry executive said.