Missouri/Illinois Join Climb Out of Recession

Missouri and Illinois are among 46 states which are showing sustained recovery over the past few months, Reed Construction Data reported.

The expansion in economic activity in 46 states in the three months through May is persistent enough to assure that a sustained recovery is underway. The recession is still lingering in Alaska, Montana, Colorado and Nevada which all experienced no growth in the last three months and had a steady or declining economic activity index in May.

Missouri charts near the bottom of the states recovering, with a 2.4 increase in activity over the last three months and a 12.6 prercent drop in activity since the peak of 2007-2008. Illinois was up 3.5 percent in the three-month period and down  The rise in the state economic activity indexes is consistent with May national data for jobs, consumer spending and factory production which all improved.

A broader and stronger expansion likely occurred in May based on early reports for jobs and consumer spending, specifically over 400,000 people hired for temporary 2010 Census work. Over 200,000 Census workers were laid off since the May jobs survey date and most of the rest will finish work in June or July. This will drop a few states back into recession conditions during the summer.

The growth rates are the state economic growth indexes calculated by the Philadelphia Federal Reserve Bank from state employment and income data which are benchmarked to approximately track national GDP growth. State growth rates are below the national growth rate. Most of the 1st quarter gain in GDP and a large share of expected GDP growth in the second quarter were due to reduced inventory absorption. This data is not available at the state level.

Construction spending declined in May as residential building fell after a popular homebuyers' tax credit expired, the Commerce Department reported.

The report comes after government data released last month showed sales of new and previously-owned homes fell sharply in May. The federal government's tax credit for homebuyers expired April 30.

The renewed slump in housing indicates that the sector's recovery earlier this year was almost totally dependent on government incentives.

The Commerce Department said that construction spending dropped by 0.2 percent, after rising by a downwardly revised 2.3 percent in April. Analysts expected a steeper drop.

The decline was driven by a 0.4 percent decrease in construction spending on new homes and apartments. That followed a 5 percent jump in April. The department previously reported that new home construction fell by 17 percent in May, and new home sales plummeted 33 percent to a record low annual rate of 300,000.

The National Association of Realtors said the number of buyers who signed contracts to purchase homes dropped in May to the lowest level on records dating from 2001.

The Realtors' group said its seasonally adjusted index of sales agreements for previously occupied homes tumbled 30 percent. The index fell to 77.6 in May from 110.9 in April.

Commercial building projects also declined, the Commerce Department report said. Spending on office buildings, shopping malls, and other projects fell by 0.6 percent, its steepest drop since February. That followed an increase in April, the first rise in commercial building since March 2009.

The sector has suffered in the weak economy due to rising loan defaults and tighter credit. That has made it harder for developers to get financing.

Government spending on highway and other infrastructure projects rose by 0.4 percent, the third straight month of gains. But some economists worry that those increases could decline in coming months as state and local governments cut spending in an effort to close budget gaps.

State and local construction spending rose in May by 0.6 percent, to $275 billion, while federal spending dropped by 1.3 percent to $30.5 billion.

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