2008 record      

 

Americans are still modestly pessimistic about the economy, according to the latest IBD/TIPP Economic Optimism Index, with investor confidence sinking after the Dow industrials and S&P 500 suffered their worst-ever starts to a new year.

The Economic Optimism Index edged up 0.1 point in January to 47.3. Readings above 50 signal optimism. But aside from two months in early 2015, the index has been below 50 since October 2012.

 

Self-described investors soured after the major averages suffered their worst week in more than four years. Their overall reading fell 1.5 points to 45.8. That’s the lowest since early September, soon after the Aug. 24 stock market plunge. Meanwhile, sentiment among non-investors, benefiting from plunging U.S. gasoline prices and faster job growth, rose 3.1 points to 49.3.

“Low gasoline prices are helping to maintain confidence,” said Raghavan Mayur, president of TechnoMetrica, IBD’s polling partner.

Despite gasoline prices that are rising (topping $3 per barrel in Los Angeles), California was more optimistic about the U.S. economy than the nation overall, with a reading of 49.6 for the overall index.

Home sellers are benefiting from rising house prices in the Golden State. San Francisco and its surrounding cities and suburbs are getting a boost from the growth of tech companies, which usually provide solid wages. Apple (AAPL), Alphabet (GOOGL), Facebook (FB) and Tesla Motors (TSLA) call California home. Netflix (NFLX), the best-performing S&P 500 stock last year, also is California-based.

Consumer confidence remained predictably partisan. Democrats’ EOI reading was 57.3 vs. just 31.3 for Republicans, but both were higher than December’s reading. Meanwhile, independents’ pessimism grew, with their reading down 1.1 points to 38.9. That could help explain Donald Trump’s populist appeal and could portend difficulty for the Democratic Party as it seeks to hang on to the White House in 2016.

Thirty-eight percent of Americans think the U.S. is currently in a recession, and 55% do not, vs. 39% who believed we were in a recession in December against 56% who didn’t. But among independents, it’s 46%-48% vs. 43%-52% in December. Just 37% of independents say the economy is improving, vs. 46% overall.

The survey mirrors the “below-average rut” reported Tuesday by the National Federation of Independent Business, whose Small Business Optimism Index rose 0.4 point in December to 95.2. The index has posted lackluster readings during the recovery, now in its seventh year. But a net 15% of small firms said they planned to add staff, the most in a year. A net 20% plan to increase compensation, the same as in November. That reading hasn’t been higher since 2001.

Among the major IBD/TIPP subindexes:

The Six-Month Economic Outlook Index rose 1.1 points to 42.9, with non-investors’ stronger sentiment again offsetting gloomier investors.

The Personal Financial Outlook Index was 58.2, down 1.4 points but still upbeat. December’s 59.6 reading was the best in three years.

The Confidence in Federal Economic Policies gauge edged up 0.6 point to 40.7.

The IBD/TIPP Poll was conducted Jan. 4-8, surveying 967 Americans, giving it an overall margin of error of +/- 3.2 percentage points. The poll was taken by live interviewers using both land and cell phones.

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