Service sector deteriorates in the Dallas Fed survey

• Outlook -11.3 vs +4.6 prior
• Revenue +1.3 vs +8.2 prior
• Employment +2.2 vs -0.1 prior
• Six months outlook -0.6 vs +13.3 prior
• Six months revenue +30.9 vs +43.9 prior
• Capex +11.9 vs +20.3 prior

Comments in the report:

Management of companies and enterprises

• We are a bank, our net interest margin last year was down as our
  deposit rates were up and prime loan rates down. This year our margins
  should be a little better. Our investment cash flow and reinvestment
  rates are better.

Professional, scientific and technical services

• Partners servicing clean energy clients supported by federal
  grants are scaling back —rapidly. Uneconomic projects are being
  shelved.
• Most of our work is in the private sector. It is our hope that the
  reduction in government spending reduces interest rates. We are also
  hopeful that a reduction in regulations spurs private sector growth.
• Our clients are laying off people, such as our non-profit clients who relied on USAID money and others.
• We are a CPA firm that has ongoing dealings with the IRS, SBA and
  Social Security Administration. The government personnel cutbacks will
  significantly affect our ability to address issues with these agencies.
• The slashing of so many programs and funding around anything deemed DE&I will cut off a portion of our business.
• Unfortunately, the federal workforce reduction is getting rid of
  the good and the bad, high performers as well as the low performers. We
  see a lot of good workers, especially those who have valuable
  experience and institutional knowledge, leaving the government. With
  uncertainly on the rise, we are lowering our projections and are
  concerned that private sector consultants will be assuming additional
  risks.
• Uncertainty is affecting our investment decisions. Having no idea
  what tomorrow will bring (on a daily basis) is not conducive to
  capital investment.

Rental and leasing services

• We think uncertainty about tariffs has given our suppliers an excuse to raise their prices.

Administrative and support services

• We are seeing more emotional reactions as opposed to real,
  substantive financial impact to the chaotic and shifting federal policy
  decisions. It’s a relatively dramatic change from what we were seeing
  in early January 2025.

Real estate

• Many of our poorest apartment residents rely on charities to
  subsidize their rent. As soon as the charities were cut off, our rental
  income dropped, and more evictions are becoming necessary.

Insurance carriers and related activities

• At the end of last year, we saw an uptick in the small businesses
  we service. They began buying insurance again and hiring more employees
  instead of cutting. We believe a number of small businesses won’t
  weather the storm ahead and others will be dropping employees.

Securities, commodity contracts and other financial investments and related activities

• Reduced government spending and policy uncertainty will likely affect our clients, which will reduce spending and investment.

Credit intermediation and related activities

• We are concerned about the possible impacts digital money systems may have on traditional banking.

Support activities for transportation

• Tariffs are still a major concern, and also if government cancels
  the Office of Refugee Resettlement budget we would be highly affected.

Accommodation

• We have already experienced a large government conference cancelation due to the news coming out of D.C.

This article was written by Adam Button at www.forexlive.com.