By Cortney Cowley & Megan Williams The Services Survey released July 25 by the Federal Reserve Bank of Kansas City showed that Tenth District services activity fell modestly in July, while expectations for future activity remained positive.
“Regional services activity declined slightly from June but was expected to pick up in coming months,” said Cortney Cowley, the Oklahoma City Branch executive. “Input prices continued to ease, while selling prices stayed steady from June,” she added.
Contacts were asked special questions about profit margins and passthrough ability.
A significant portion of firms, 41% of them, reported that in the previous quarter there was a slight decrease in profit margins, while 15% reported a significant decrease, 14% reported no change, 26% reported a slight increase, and 4% reported a significant increase.
In the next 12 months, 40% of firms expect margins to slightly decrease, 13% expect a significant decrease, 16% anticipate no change, 28% predict a slight increase and 3% a significant increase.
Additionally, 41% of firms reported that over the last few months their ability to pass through rising input prices has not changed, 33% reported it is harder to pass through costs, 23% reported a slight increase in ability, and 3% of firms reported a considerable increase. Selected comments “Customers are more careful on spending and number of visits. Also, we are seeing more new competition of dining places in the area.”
“Existing home listings are up versus last month and last year, but sales are slow due to asking prices that are too high because of either paying too much during the Covid years, or interest rates being high enough to suppress demand. This development is not a bust but a welcome reset to proper pricing according to the market.”
“Business has slowed dramatically.”
“Business volume has been softening for several months. People are pulling back on their travel and spending.”
“We have always maintained a debtfree business. However, it is becoming harder to maintain our liquidity. We are reverting back to the days when we first started, when owners had to fund expenses to stay afloat.”
The Kansas City Fed’s monthly Survey of Tenth District Services provides information on several indicators of activity, including sales, revenue, employment and capital spending, while identifying changes in prices of input materials and selling prices.
Survey participants represent a variety of industries, including retail and wholesale trade, automobile dealers, transportation, information, hightech and professional services, real estate, education, restaurants, health services, tourism and other services firms.
The Kansas City Fed serves the Tenth Federal Reserve District, which encompasses the western third of Missouri; all of Oklahoma, Kansas, Colorado, Nebraska and Wyoming; and the northern half of New Mexico.
Cortney Cowley serves as the Oklahoma City Branch executive and assistant vice president for the Federal Reserve Bank of Kansas City. She earned a Ph.D. in Agricultural Economics from Oklahoma State University, as well as a master’s degree in civil engineering from Colorado State University and a bachelor’s degree in biosystems engineering from OSU. Cowley, her husband and 8-year-old twins live on a small farm northwest of Oklahoma City.
Megan Williams is associate economist and senior manager in the Regional Affairs department at the Kansas City Fed’s Oklahoma City Branch office. She holds a bachelor’s degree in finance from Oklahoma State University and an MBA from the University of Oklahoma. She lives in Choctaw with her husband and two children.