The IBD/TIPP Economic Optimism Index slipped 1.6 points, or 3.1% in May, posting a reading of 49.7 vs. 51.3 in April. The index is 2.0 points above its 12-month average of 47.7, 5.3 points above its reading of 44.4 in December 2007 when the economy entered the recession, and 0.5 points above its all-time average of 49.2.
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 901 adults from April 25 to May 3. 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 decreased.
• The Six-Month Economic Outlook, a measure of how consumers feel about the economy’s prospects in the next six months, dropped 3.8 points, or 7.4%, to 47.7. 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 1.6 points, or 2.8%, to 58.3.
• Confidence in Federal Economic Policies, a proprietary IBD/TIPP measure of views on how government economic policies are working, decreased 2.6 points, or 5.7%, to 43.1.
“Gasoline prices are slowly climbing. Contrary to the long-held popular belief that the job market is doing great, the recent data suggest otherwise. For example, in our poll, twenty-three percent of households have at least one person looking for a full-time job,” said Raghavan Mayur, president of TechnoMetrica, IBD's polling partner.
“The news that the economy barely grew during the first quarter reflects the ongoing slow expansion since 2008,” said Terry Jones, associate editor of Investor’s Business Daily. “While Americans have faith that their own finances will get better, their confidence in government’s ability to handle economic policy remains weak.”
This month, 10 of the 21 demographic groups that IBD/TIPP tracks were above 50 on the Economic Optimism Index. No group improved, twenty groups declined and one did not change.
On the Economic Outlook component, 6 of the 21 groups that IBD/TIPP tracks scored in optimistic territory. One group improved and nineteen declined. One did not change.
On the Personal Financial component, 20 of the 21 groups IBD/TIPP tracks scored in optimistic territory. Thirteen groups increased and eight declined.
On the Federal Policies component, two of the 21 demographic groups tracked were above 50. One group advanced on the component and twenty groups declined.