Fifth District Survey of Service Sector Activity

Nov. 27, 2012 10 a.m.

Service Sector Revenues Strengthened; Employment Remained Weak


Service sector activity expanded in November, although employment remained soft, according to the latest survey by the Federal Reserve Bank of Richmond. Revenues rose at retail and non-retail services businesses. Shopper traffic increased and retail inventories flattened. However, big ticket sales dropped. Retailers expected softer sales during the next six months, while services providers anticipated continued business improvement.

In service sector labor markets, the number of employees fell while average wages continued to advance. However, the pace of increase in wages slowed somewhat compared to last month.

Price growth ticked up slightly overall. Looking ahead six months, survey respondents expected prices to advance more quickly, with much of the push coming from retail price growth.

Service Sector

Revenues in the broad service sector picked up in November, pushing the index to 7 from last month's reading of 3. Employment weakness continued, however, with the index for the overall number of employees slipping five points lower to settle at −6. Average wage growth lost some of its momentum, slowing to an index of 9 following October's 11. Looking ahead six months, expectations for demand for goods and services were bolstered by optimism from non-retail services firms. The sector index finished at 7, one point above the previous month.

Retail Firms

Retail sales rebounded in November, with a burst of shopper traffic. The retail sales index added nine points ending at 14 and the index for shopper traffic reversed direction, climbing thirty-four points to 23 this month. In contrast, big-ticket sales fell, with that index dropping nine points to −14. Retail inventories were generally unchanged; the index settled at −1. Despite the improvement in sales, retailers were less sanguine about business prospects in the next six months. The expectations index declined to −3 from October's reading of 5.

Retail employment fell in November, with that index ending the month at −13, a point below last month's −12. In contrast, average retail wage growth strengthened further, with the wage indicator climbing to 8 this month from its previous reading of 2.

Services Firms

Non-retail services providers also noted an uptick in revenues in November, with the index edging up to 4 from the month-ago reading of 0. However, services providers reduced their number of employees, sending that index down to −6 from October's 1. Average wage growth slowed, with the index shaving three points from last month's reading to end the survey period at 7.

Non-retail services providers were somewhat more upbeat about their business outlook for the six months ahead — the gauge for expectations rose three points this month to 9.


Growth in service sector prices was little changed from last month's pace, rising at an annualized 1.16 percent rate, compared October's 1.07 percent rate. Within the service sector, retail prices rose a bit more slowly, at a 1.84 percent annualized rate following last month's 1.88 percent pace. Non-retail services prices increased at an annualized 1.01 percent rate, slightly above October's 0.97 percent pace.

Survey participants anticipated a pickup in price growth over the next six months. They expected future prices to grow at an annualized 1.68 percent rate, compared to October's outlook for 1.41 percent growth. Separately, retailers looked for prices to accelerate at a 2.43 percent clip, compared to last month's outlook for 1.74 percent growth. Non-retail services providers expected prices to increase at a 1.53 percent pace, also above their previous outlook. In October, they looked for future price change of 1.39 percent.

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Regional Survey Team
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