The IBD/TIPP Economic Optimism Index slipped 1.6 points, or 3.2% in June, posting a reading of 48.1 vs. 49.7 in May. The index is 0.4 points above its 12-month average of 47.7, 3.7 points above its reading of 44.4 in December 2007 when the economy entered the recession, and 1.1 points below 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 856 adults from May 26 to May 31. The margin of error is +/-3.4 percentage points.
The IBD/TIPP Economic Optimism Index has three key components. This month, all three components of the index declined.
• The Six-Month Economic Outlook, a measure of how consumers feel about the economy’s prospects in the next six months, dropped 2.4 points, or 5.0%, to 45.3. 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, decreased 0.6 points, or 1.0%, to 57.7.
• Confidence in Federal Economic Policies, a proprietary IBD/TIPP measure of views on how government economic policies are working, declined 1.9 points, or 4.4%, to 41.2.
“Recent economic reports showed contraction. Further, recent data indicates weak employment growth. 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 economy clearly hit a soft patch in the first quarter,” said Terry Jones, associate editor of Investor’s Business Daily. “Based on the most recent GDP estimates for the second quarter, a strong surge in growth isn’t likely soon. Americans seem to understand this.”
This month, six of the 21 demographic groups that IBD/TIPP tracks were above 50 on the Economic Optimism Index. Five groups improved and sixteen groups declined.
On the Economic Outlook component, 2 of the 21 groups that IBD/TIPP tracks scored in optimistic territory. Four groups improved and sixteen declined. One did not change.
On the Personal Financial component, all of the 21 groups IBD/TIPP tracks scored in optimistic territory. Nine groups increased and twelve declined.
On the Federal Policies component, two of the 21 demographic groups tracked were above 50. Five groups advanced on the component and sixteen groups declined.