Continued weakness in retail sales combined with nearly flat revenues at services-producing firms kept service sector indicators in slightly negative territory in April, according to the latest survey by the Federal Reserve Bank of Richmond. Declining big-ticket sales continued to drag down overall retail sales, although the decline lessened compared to a month ago. Shopper traffic also declined at a more moderate pace, even as retail inventories shrank more rapidly. At services-producing firms, revenue growth slowed in April. Looking ahead six months, retailers were nearly neutral about their expectations for consumer demand, while contacts at services firms remained generally upbeat.

In District labor markets, retailers slashed jobs and services producers added a modest number of workers—both changes were on pace with the previous month. Wage growth in the service sector was also little changed from a month ago.

Price growth slowed in April at both retail and services businesses. However, retailers and services contacts anticipated sharper price growth over the next six months, as they did last month.

Weaker revenues in the overall service sector reflected softer retail sales and tepid revenue growth at services-producing firms in April. The broad service sector index settled at -2, three points above its month-ago reading. The index for employment performed similarly, moving to -2 from last month's -4. The index for average wage growth in the sector was steady, matching its three-month average, at 12. Survey respondents were more circumspect in their outlook for business prospects in the six months ahead. The index shed eight points, to 14 in April.

Retail activity remained in negative territory in April, although the pace of contraction moderated from that of a month earlier. The sales index improved to a reading of -10 in April, from March's -30. Big-ticket sales continued to contract but the fall in that category also slowed compared to a month ago, with the index at -38 in April compared to last month's -55 reading. The inventories index ended the survey period at -30 after March's -20, while the decline in shopper traffic abated somewhat—to an index of -21 following the March index of -45. In addition, retailers were mildly optimistic about expected sales over the next six months, with that index picking up nine points to 1.

In the retail sector, job reductions continued, with the employment index at -22 for a second month. Average retail wage growth slowed to an index of 7 from last month's reading of 10.

Revenue growth at services-producing firms remained tepid in April, with the index at 2 from March's 4. However, the pace of hiring remained steady, with that index adding a point to finish at 6. Average wage growth at services firms crept up slightly; the index rose to 14 in April, compared to its month-earlier reading of 12. Survey respondents at services firms continued to expect generally firmer demand for their services in the coming six months, though the index fell 16 points to 20.

Overall service sector price growth slowed in April, to an annual rate of 0.93 percent following March's 1.16 percent. Retail price growth decelerated to 1.70 percent growth from last month's 2.29 percent annual pace. Respondents at services-producing firms reported 0.62 percent growth in April; in March, services firms' prices grew at a 0.66 percent pace.

Despite tamer readings for April, respondents generally looked for price growth to move higher over the next six months. In the overall service sector, respondents expected prices to grow at a 2.00 percent clip, after March's outlook for 1.93 percent. Separately, retailers expected price growth of 2.83 percent in April, slightly below the 2.88 percent they looked for in March. Contacts at services firms expected somewhat faster price growth; in April, they anticipated 1.65 percent growth in the six months ahead; in March they looked for 1.53 percent growth.

All firms surveyed are located within the Fifth Federal Reserve District, which includes the District of Columbia, Maryland, North Carolina, South Carolina, Virginia, and most of West Virginia.