The IBD/TIPP Economic Optimism Index precipitously declined 7.9 points, or 15.5%, in March posting 43.0 vs. 50.9 in February.
The index is 3.7 points below its 12-month average of 46.7 and 1.4 points below its reading of 44.4 in December 2007 when the economy entered into the recession, and 7.6 points below its all-time average of 50.6. The 7.9 points drop is the second biggest month-to-month decline in the index's ten-year history --1.8 points shy of its earlier record of 9.7 points in September 2005 in the aftermath of Hurricane Katrina. The previous low for the index was 41.1 in October 2008 during the sub-prime turmoil 29 months ago.
Note: Index readings above 50 indicate optimism; below 50 indicate pessimism.
The IBD/TIPP Economic Optimism Index has a good track record of foreshadowing the confidence indicators put out later each month by the University of Michigan and The Conference Board. IBD/TIPP conducted the national poll of 917 adults from February 28 to March 6. The margin of error is +/-3.3 percentage points.
The IBD/TIPP Economic Optimism Index has three key components, all of which declined in March.
• The Six-Month Economic Outlook, a measure of how consumers feel about the economy's prospects in the next six months, dropped 13.3 points, or 25.1%, to 39.7. When compared to December 2007, the index shows a gain of 7.6 points.
• The Personal Financial Outlook, a measure of how Americans feel about their own finances in the next six months, declined 5.9 points, or 10.5%, to reach 50.2.
• Confidence in Federal Economic Policies, a proprietary IBD/TIPP measure of views on how government economic policies are working, fell 4.5 points, or 10.3%, to reach 39.0.
"Consumer confidence nosedived in March virtually erasing out its January gains. Uncertainties with the middle-east situation are the primary reason. Two-thirds say they are affected by the escalation of gasoline prices. The job situation is also a contributing factor. Twenty-three percent of households mention that at least one member is looking for full-time employment. The realities of the situation are grimmer than the picture portrayed by last week's job report," said Raghavan Mayur, president of TIPP, a unit of TechnoMetrica Market Intelligence, IBD's polling partner.
"Obviously, the 33-cent a gallon surge in gasoline prices in just two weeks is hitting average Americans hard, cutting sharply into their disposable income," said Terry Jones, associate editor of Investor's Business Daily. "Until energy prices reverse or stabilize, consumer confidence is likely to remain weak – and perhaps decline even further."
This month, only three of the 21 demographic groups that IBD/TIPP tracks were above 50 on the Economic Optimism Index. Twenty groups declined on the index.
On the Economic Outlook component, only three of the groups IBD/TIPP tracks scored in optimistic territory. Twenty groups declined.
On the Personal Financial component, eleven of the groups IBD/TIPP tracks scored in optimistic territory. Two groups advanced on the component and nineteen declined.
On the Federal Policies component, only two of the 21 demographic groups tracked were above 50. All the twenty-one groups declined in March.
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ABOUT THE IBD/TIPP POLL
The IBD/TIPP Economic Optimism Index is the earliest take on consumer confidence each month and predicts with 80% reliability monthly changes in sentiment in well-known polls by The Conference Board and the University of Michigan. The IBD/TIPP Economic Optimism Index is based on a survey of 900-plus adults chosen at random nationwide. The poll is generally conducted in the first week of the month.
For more information, go to www.tipponline.com
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