Texas economic conditions appeared to deteriorate in January, but there is optimism about growth later this year, according to the Federal Reserve Bank of Dallas' latest Texas Economic Update.
"A lot of the softness in January particularly in the service sector was driven by the escalating COVID-19 cases," said Dallas Fed senior business economist Emily Kerr. "This is what we heard from a lot of our business contacts especially in the high contact service industries. So restaurants, hotels, transportation...these escalating cases were really dampening their business."
High-frequency indicators were also downbeat in January, as the COVID-19 pandemic accelerated faster in Texas than in the U.S. in December and early January.
Despite the pandemic's severity, the Texas Mobility and Engagement Index exceeds that of the U.S.
However, the Texas reading is lower in January than it was in December, according to the report.
Roughly 60% of all firms in the Texas Business Outlook Surveys reported that their revenues as of January remained below what they were before the outbreak.
Most firms expected improvement by year-end.
"Overall, outlooks are positive, and stimulus payments, PPP and the vaccination rollout are tailwinds for economic growth this year with most firms expecting business to return to pre-COVID levels by year-end," Kerr said.