Economy Watch: Americans' Personal Income, Savings Up

By Dees Stribling, Contributing Editor

U.S. personal income grew 0.5 percent in December, according to the Bureau of Economic Analysis on Monday. That might not sound like much, but it adds up to an additional $61.3 billion either injected into the consumer economy or used for savings or to pay down debt. Real disposable personal income—what everyone gets to use for purposes besides taxes, and accounting for inflation—increased 0.3 percent in December, in contrast to a decrease of a little less than 0.1 percent in November.

A good bit of the December increase in income went into savings. Personal saving—disposable personal income less outlays—was $460.1 billion in December, compared with $407.8 billion in November. The personal saving rate, calculated as savings as a percentage of disposable income, was 4 percent in December, compared with 3.5 percent in November.

Personal income increased 4.7 percent in 2011, noted the BEA, compared with an increase of 3.7 percent in 2010, and disposable personal income increased 3.4 percent, or only a little less than the 2010 increase of 3.6 percent. Those 2011 numbers sound like a healthy increases, but the hard truth is less pleasant. When inflation is factored in, real disposable income increased only 0.9 percent during 2011, compared with a real increase of 1.8 percent in 2010.

EU agrees to German discipline

At the latest confab of European panjandrums, most of the nations of the EU (23 of 25, with the U.K. and the Czech Republic voting no) agreed to sign a treaty—a “fiscal compact,” actually—proposed and pushed mainly by Germany. The problem with the euro zone thus far, in the German view, has been excess public spending. The answer, also in the German view, is more discipline.

That is, fiscal discipline enforced by sterner penalties on euro-zone countries doing the kind of overspending that has gotten Greece, Italy, Spain and Portugal into their current dire straits. Among other things, the deal would demand that deficit spending be capped by law in each of the euro-zone countries. “Every country that signs it commits to bringing in a ‘debt brake’ or ‘golden rule’ into its own legislation, and will do so at constitutional or equivalent level,” said European Council President Herman Van Rompuy in a statement.

The summit meeting did not, however, take up the subject of bigger bailouts to deal with the current debt crises (except that bailout mechanisms are now “firewalls”). Germany has not been so keen on that subject since, after all, the cost of bailouts or firewalls will tend to fall on that nation. But that subject is expected to rear its head again when the euro-panjandrums meet again in March.

Regional industrial production sees uptick

The Federal Reserve of Chicago reported on Monday that its Midwest Manufacturing Index increased 1.7 percent in December, to 87.4 (2007 = 100), after a revision rendered the index at unchanged in November. Regional industrial output in December rose 8.4 percent from a year earlier, according to the Fed, while national output increased 4 percent.

Texas manufacturing is also doing well, according to the Federal Reserve of Dallas, which also published survey results on Monday. Its Texas Manufacturing Outlook Survey’s production index, a key measure of state manufacturing conditions, rose from 0.2 to 5.8 in January suggesting growth resumed during the month.

Wall Street took a dive early in the day on Monday, but recovered most of the lost ground as the day wore on. The Dow Jones Industrial Average ended down by a scant 6.74 points, or 0.05 percent, while the S&P 500 lost 0.25 percent and the Nasdaq declined 0.16 percent.