Declines in house prices mixed with increases in foreclosures are not showing a hugely negative knock-on impact for the nation's overall economic recovery, according to a weekly report by FTN Financial, a portfolio manager and analytics provider for the investment and banking industry. The announcement comes as recent housing data speaks otherwise and appears to fail to fulfill hopes of a broad recovery. FTN reached its conclusion based on an examination of local sales tax data, which shows that even in the absence of available housing-backed capital, such as the once-popular home equity lines of credit, consumers are still buying in a way that can't be measured against the backdrop of local foreclosures and price declines. "Local housing prices and poor credit by themselves do not solely determine participation in the recovery so far," said Jim Vogel, a financial analyst at FTN and author of the weekly report. "While housing contributed to the downturn, it is not an absolute roadblock to recovery." Vogel notes that economic growth in the past three business cycles was led by confidence in consumer spending, and supported by gains from refinanced first mortgages and new second lien home equity loans. But the extent of the decline in the housing and mortgage markets from 2007-2009 calls into question the speed and sustainability of the current recovery. For the report, FTN analyzed state sales tax receipts in the second half of 2009 in particularly hard-hit metropolitan areas, and compared the data with more stable housing economies. FTN concluded that spending recovery patterns are not necessarily worse in regions with the worst housing markets. The housing market in Florida, for example may have high foreclosures and mixed with dropping home prices, but when it comes whether or not this impacts the spending habits of the state's inhabitants, there appears to be a "zero correlation," the reports states. "[S]ales tax receipts were uncorrelated in 2H 2009 with housing misery," Vogel said. "That has led to a tentative conclusion that continued home price declines and foreclosures are not fatal to the overall economic recovery." FTN also concluded the economy grew in the second half of the year despite tight mortgage lending standards. The growth was largely driven by federal stimulus, although consumer spending contributed as well. "Housing will not be an early contributor to the recovery, but that has not prevented a contribution from consumers," Vogel added. Write to Diana Golobay.