The IBD/TIPP Economic Optimism Index improved by 0.4 points, or 1.0%, in October posting 40.3 vs. 39.9 in September. In August, the index had crashed to its historic low of 35.8.  The index is 3.4 points below its 12-month average of 43.7 and 4.1 points below its reading of 44.4 in December 2007 when the economy entered into the recession, and 9.8 points below its all-time average of 50.1.

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 909 adults from October 1 to October 5. The margin of error is +/-3.5 percentage points.

The IBD/TIPP Economic Optimism Index has three key components, two of which improved in October.

•    The Six-Month Economic Outlook, a measure of how consumers feel about the economy’s prospects in the next six months, decreased 0.2 points, or 0.5%, to 36.7.  The sub-index was 32.1 when the economy entered the last recession in December 2007.

•    The Personal Financial Outlook, a measure of how Americans feel about their own finances in the next six months, improved 0.3 points, or 0.6%, to reach 51.9.
•    Confidence in Federal Economic Policies, a proprietary IBD/TIPP measure of views on how government economic policies are working gained 0.9 points, or 2.9%, to reach 32.2.
"Consumer confidence is still in a vulnerable territory, despite its modest improvement in October," said Raghavan Mayur, president of TIPP, a unit of TechnoMetrica Market Intelligence, IBD's polling partner.

“Americans remain glum about their economic future,” said Terry Jones, associate editor of Investor’s Business Daily. “The repeated failure of government efforts to stimulate the economy has left many perplexed and angry at the soaring costs and lack of results.  In particular, the lack of any meaningful jobs recovery has created a feeling among many that Washington politicians are out of touch with economic reality.”

The Breakdown

This month, three of the 21 demographic groups that IBD/TIPP tracks were above 50 on the Economic Optimism Index. Thirteen groups increased on the index.

On the Economic Outlook component, all of the 21 groups that IBD/TIPP tracks scored in pessimistic territory.   Eleven groups improved in October.

On the Personal Financial component, fifteen of the groups IBD/TIPP tracks scored in optimistic territory. Eight groups declined on the component and thirteen improved.

On the Federal Policies component, all of the 21 demographic groups tracked were below 50.  Thirteen groups advanced on the component, seven declined and one did not change.
*    *    *

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.

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