The economy's recent performance looks better if we measure it using aggregated incomes rather than expenditures. Gross domestic income increased by 2.7% annualised in the first quarter, easily outpacing the 1.9% increase in gross domestic product. Those gains in income are still accruing mainly to firms rather than households, however. Personal disposable incomes barely edged higher, particularly in real terms, while corporate profits were boosted by a further rebound in the financial sector. Separate figures from the FDIC show US banks' net income rebounding to pre-crisis level in the first quarter. Despite the Fed's near-zero interest rate policy, banks' net interest income is still at a fairly healthy level. However, the big driving force behind bank profitability has been the sharp drop in loan default rates.
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