The IBD/TIPP Economic Optimism Index fell 1.1 points, or 2.4% in August, posting a reading of 44.5 vs. 45.6 in July. The index is 0.1 points below its 12-month average of 44.6, 0.1 points above its reading of 44.4 in December 2007 when the economy entered the recession, and 4.8 points below its all-time average of 49.3.
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 852 adults from July 26 to July 31. The margin of error is +/-3.4 percentage points.
The IBD/TIPP Economic Optimism Index has three key components. This month, two of the three components declined.
• The Six-Month Economic Outlook, a measure of how consumers feel about the economy’s prospects in the next six months, improved 0.2 points, or 0.5%, to 41.8. 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, lost 0.4 points, or 0.7%, to 54.3.
• Confidence in Federal Economic Policies, a proprietary IBD/TIPP measure of views on how government economic policies are working, dropped 2.9 points, or 7.2%, to 37.5.
“Consumers' confidence continues to be in the negative territory. 53% believe that the economy is not improving and 47% think that we are in a recession. Further, 20% of households say at least one member is looking for a full-time job,” said Raghavan Mayur, president of TIPP, a unit of TechnoMetrica Market Intelligence, IBD's polling partner.
“Despite the much-touted expansion and 4% second-quarter GDP growth, confidence continues to trend sideways,” said Terry Jones, associate editor of Investor’s Business Daily. “Average Americans are clearly concerned about the pace of job growth and the economy’s overall health, and are showing much less confidence that the federal government can handle these problems.”
This month, two of the 21 demographic groups that IBD/TIPP tracks were above 50 on the Economic Optimism Index. Seven groups improved and fourteen declined.
On the Economic Outlook component, two of the 21 groups that IBD/TIPP tracks scored in optimistic territory. Ten groups improved and eleven declined.
On the Personal Financial component, sixteen of the 21 groups IBD/TIPP tracks scored in optimistic territory. Nine groups increased and twelve decreased.
On the Federal Policies component, two of the 21 demographic groups tracked were above 50. Seven groups advanced on the component and fourteen declined.