2012.05.31 16:33:30 MARKET TALK: Eonia Fixes Lower, Liquidity Flush

(This story has been posted on The Wall Street Journal Online's Real Time Economics blog at http://blogs.wsj.com/economics.) By Jeffrey Sparshott The government made a sharp downward revision to fourth-quarter income figures Thursday, a sign of stagnant wages and a potential hurdle for consumer spending. The figures, tucked in to the latest GDP report, show real disposable personal income--income minus taxes, adjusted for inflation--rose only 0.2% in the fourth quarter, compared with an earlier estimate of 1.7%. The change is largely due to lower-than-expected paychecks. Real first-quarter income was unrevised at a 0.4% gain. The upshot: consumers are saving less in order to spend more. Consumer outlays rose a solid 2.1% in the fourth quarter and 2.7% in the first three months of this year. But the personal savings rate for the first quarter dropped its lowest level since the start of the recession. Americans stashed away 3.6% of personal income in the first quarter, down from 4.2% in the fourth quarter and a near-term peak of 6.2% in the second quarter of 2009. "With real wages and salaries now estimated to have grown at only a 0.7% annualized rate in [the fourth quarter and first quarter], and the saving rate revised down, the consumer is clearly in a weaker position than previously reported. Lower gasoline prices will help to cushion the blow, but, as always, the direction of the labor market will be the key variable in coming months," Joshua Shapiro, chief U.S. economist at MFR Inc., said in a research note. The wage and salary revisions dragged down one measure of economic growth. Real gross domestic income, an alternative measure of growth which tallies the costs incurred and the incomes earned in the production of GDP, was revised to a 2.6% growth rate in the fourth quarter, down 1.8 percentage points from the previous estimate. GDI was up 2.7% in the first quarter. -For continuously updated news from The Wall Street Journal, see WSJ.com at http://wsj.com. (END) Dow Jones Newswires May 31, 2012 10:36 ET (14:36 GMT)