Spending Up, But Saving Up More

Personal income increased 0.4 percent in May compared with April, and disposable personal income--arguably the best kind, since it's good to have some cash to go out and stimulate the economy with--was also up 0.4 percent during the month, according to the Bureau of Economic Analysis.

June 29, 2010
By Dees Stribling, Contributing Editor

Courtesy Flickr Creative Commons user gabofr

Personal income increased 0.4 percent in May compared with April, and disposable personal income–arguably the best kind, since it’s good to have some cash to go out and stimulate the economy with–was also up 0.4 percent during the month, according to the Bureau of Economic Analysis. That was a bit less than the April increase for both kinds of income, which was 0.5 percent.

But are people out there spending their slightly higher incomes? Somewhat. In May, personal consumption expenditures increased only 0.2 percent. That’s better than the increase in April, which was no increase at all, but well short of the 2.5 percent per quarter average increase since this time last year.

Also, the personal savings rate was 4 percent in May, the highest figure since September 2009. Savings had been edging down since then, but perhaps people are reacting to current events–the Euro-mess and its ilk–or perhaps savings rates are stabilizing at a new normal because of a new mindset among Americans. Namely, don’t buy it unless you can afford it.

Chicago Fed National Activity Index Manages to Stay Positive

The Chicago Fed National Activity Index, which is a blend of 85 economic indicators tracking income, employment, consumption, sales, housing, inventories and more, edged down slightly in May to +0.21, compared with +0.25 in April. According to the Chicago Fed, weaker contributions from employment and housing indicators accounted for the downtick.

Still, positive is positive for the index, which from early 2008 to early 2010 described path looking like a cut-away diagram of the Mariana Trench–deep down, then sharply up, but always in negative territory.

The index’s three month moving average rose to its highest level since March 2006, to +0.28 in May from +0.05 in April. That sounds like good news, too, except for one thing. The Chicago Fed noted: “The index’s three-month moving average in May also reached a level historically associated with a mature economic recovery following a recession.” Mature, as in this is as good as the recovery gets?

Sarbanes-Oxley is Here to Stay

Those hoping to avoid the rigors of Sarbanes-Oxley in the future got a splash of cold water on Monday from the U.S. Supreme Court, as the high court handed down a ruling that tinkered at the edges of the law, but otherwise let it be.

The Public Company Accounting Oversight Board, which was created by Sarbanes-Oxley Act of 2002, is composed of five members appointed by the SEC. Under the original statute, board members could only be removed “for cause” by the SEC. The case was about whether that meant the board’s members were too protected from dismissal by the president. The court said the original structure was indeed unconstitutional, since it violated the principal of separation of powers.

The board itself, however, is decidedly constitutional, the court said. The majority decision was clear on this point: “With the tenure restrictions excised, the Act remains fully operative as a law… and nothing in the Act’s text or historical context makes it ‘evident’ that Congress would have preferred no Board at all to a Board whose members are removable at will… The consequence is that the Board may continue to function as before, but its members may be removed at will by the Commission.”

Wall Street had an up-and-down day on Monday, finally coming back to close to where it started, though down slightly. The Dow Jones Industrial Average lost a scant 5.29 points, or 0.05 percent, while the S&P 500 and the Nasdaq were down 0.2 percent and 0.13 percent, respectively.