Missouri economic signs 'very mixed'

JEFFERSON CITY, Mo. -- Despite an upturn in state revenue collections, optimism on the state's economic future is not running rampant.

On Monday, State Budget Director Linda Luebbering announced that Missouri revenue collections were running 2.6 percent ahead of last year at this time, with an uptick of 9.1 percent in September collections over last year.

Monthly corporate income and franchise taxes saw the most robust growth, gaining 22.9 percent over last month's collections. Those revenues are 15 percent ahead of last year. By contrast, individual income taxes increased only 1.1 percent for the month and are ahead 1.5 percent for the year.

"The individual income tax collection is the main source of revenue (for the state), and we'd like to see that grow a little bit more," Luebbering said. "It is slightly positive for the year, but we still have a long way to go before we say we are optimistic."

Because corporate tax collections are increasing, it means that Missouri businesses are doing well, making profits, but the slow growth in individual income taxes shows that businesses are holding on to their profits for now and not rehiring laid off workers or hiring new employees, Luebbering said.

Lackluster discretionary purchases reflect the financial pressure still weighing on the state. Sales tax collections, though up 3.3 percent from August, still trail last year's sales tax collections by nearly two percent.

"We're going to have to see individual income tax increases of more than five percent before things are really turning around, and getting back to where we were before," Luebbering said. "We are trying to make up for a 15 percent decrease in individual income tax and sales tax collections over the last two budget years."

Luebbering's assessment matches that of St. Louis Federal Reserve Bank economist Howard Wall. Wall and colleagues at the Eighth Federal Reserve District, headquartered in St. Louis, published their "Burgundy Book" last week.

The Eighth Federal Reserve District covers parts of seven states. The Burgundy Book covers economic conditions for the St. Louis zone. Burgundy Books are also prepared for zones in and around Little Rock Ark., Louisville, Ky., and Memphis, Tenn.

In a podcast accompanying the St. Louis region Burgundy Book, Wall called the overall economic outlook "very mixed."

"We see expansion in several parts, but there's an awful large amount of weakness out there too," Wall said.

Forty percent of retailers in the St. Louis district reported worse sales in July and August of 2010 compared to the same period in 2009, while 40 percent said they saw increases over the same period, Wall said.

Wall found some signs of optimism among retailers, noting about 50 percent said they expect to outperform last year's sales figures in September and October.

Slow growth in employment, salaries, real estate, home construction, and lending activity signal that Missouri's economy may be coming around, but very slowly, Wall said.

Luebbering said the last two recovery periods following economic downturns have been marked by robust turnarounds in several sectors of the economy. Not so this time around, she noted.

"The national economists are saying that we are in for a very prolonged turnaround, and if so, it's going to take a long time before we get back even to where we were before the recession," she said.