The combined disposable income of all Irish households increased by just over €2 billion last year compared to 2011, according to figures released from the Central Statistics Office.

It was the first annual increase since the recession began.

In 2012, aggregate disposable income of Irish households stood at €86.3 billion, a nominal increase of 2.5 per cent (the figures are not adjusted for inflation).

Disposable income includes all earnings and social benefits, less direct taxes.

Today’s numbers are somewhat ambiguous as to what they say about recovery in the domestic economy.

While the full-year figure for disposable income registered an increase on 2011, the trend from quarter to quarter over the course of 2012 was broadly flat, as illustrated in the chart.

Households use their disposable income for consumption and for saving (saving in this context includes the paying down of debt).

Today’s figures show that more than three-quarters of the increase in household disposable income was saved last year, while less than one quarter of it was spent.

Households spent just under €78 billion.

Although the increase on 2011 was small (0.5 per cent), it represented the first rise since 2008.

Because households saved more of their income gains, this pushed the overall savings rate up last year compared to 2011.

In 2012, households saved €11 billion, or 12.5 per cent of their gross disposable income, up from 10.7 per cent a year earlier.

Again, however, the full-year figure masked a trend over the course of the year.

According to the seasonally adjusted quarterly data, the savings rate declined steadily over the course of the year. This may reflect growing consumer confidence.

The Government has pinned considerable hope on a decline in savings as a means of boosting consumption, and thereby activity in the wider economy.

As the chart shows, household income and spending are still far below their 2008 peaks. The decline in spending is greater than that of income as more income has been saved.

A sharp increase in household saving is common in a recession of the kind Ireland has suffered.

When households experience declines in the value of their assets (most notably housing assets in Ireland’s case), they use more of their income to pay down debt and build up savings to strengthen their weakened balance sheets.