More than one-third of Texas business executives surveyed by the Federal Reserve Bank of Dallas said borrowing costs increased over the past year, while some firms confronting higher costs have delayed hiring, postponed expansion or raised prices.
The Dallas Fed released the October credit-conditions findings on Monday. Of 283 responding executives in manufacturing and services, 35.3% said credit costs rose over the preceding 12 months. Another 18% reported no change, 0.4% reported a decrease, and 46.3% said the question did not apply to them.
Among 71 service-sector respondents who said their credit costs had increased, 56.3% had already relied more heavily on internal funds, 38% had reduced or delayed capital spending or expansion, 28.2% had increased prices, and 25.4% had reduced or delayed hiring. These figures describe respondents facing higher borrowing costs, not all Texas employers.
Growth And Cost Pressures Coexist
The findings also show why higher borrowing costs do not tell the whole story.
Across the 283 respondents, 15% reported at least some difficulty obtaining short-term credit, and 16% reported difficulty obtaining long-term credit. Both shares were unchanged from a year earlier, according to the Dallas Fed.
Of 220 service-sector respondents to the supplemental questions, 56.8% had not sought short-term financing and 57.3% had not sought long-term financing. In each category, 14.1% reported at least some difficulty obtaining financing.
Separately, the Dallas Fed announced Tuesday that Texas service-sector activity resumed growth in October after stalling in September. The revenue index increased from minus 0.9 to 4.4, while the input-prices index remained elevated at 41.7, above its long-term average of 28.0. The indexes track the difference between shares of companies reporting increases and decreases, rather than percentage changes in revenue or prices.
Business Decisions Behind The Numbers
The credit-cost responses reveal pressure that a positive economic activity index can conceal.
Companies may continue generating revenue while putting off equipment purchases, new locations or additional hires. The survey does not establish how many jobs or projects Texas businesses have lost statewide.
Manufacturers reported similar choices.
Among 25 manufacturing respondents who answered the higher-credit-cost follow-up question, 44% had reduced or delayed capital spending or expansion and 33.3% had reduced or delayed hiring. The relatively small respondent groups limit how broadly those findings can be applied.
The survey captures both encouraging economic activity and continued financial constraints on some employers, a combination relevant to business owners and consumers weighing the cost of expansion and higher prices.
