The IBD/TIPP Economic Optimism Index increased 2.0 points, or 4.3%, in January, posting 48.8 vs. 46.8 in December. This month’s reading puts the index 0.5 points above its 12-month average of 48.3 and 4.4 points above its reading of 44.4 in December 2007 when the economy entered into the recession, and 2.3 points below its all-time average of 51.1.
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 923 adults from January 4 to January 9. The margin of error is +/-3.3 percentage points.
The IBD/TIPP Economic Optimism Index has three key components, two of which improved in January.
• The Six-Month Economic Outlook, a measure of how consumers feel about the economy’s prospects in the next six months, climbed 5.1 points, or 10.9%, to reach 51.8. When compared to December 2007, the index shows a gain of 19.7 points.
• The Personal Financial Outlook, a measure of how Americans feel about their own finances in the next six months, slipped 0.2 points, or 0.4%, to reach 53.4.
• Confidence in Federal Economic Policies, a proprietary IBD/TIPP measure of views on how government economic policies are working, improved 1.0 points, or 2.5%, to reach 41.2.
"As the year begins Americans are cautiously optimistic. The economy’s ability to create jobs will set the tone for the next few months," said Raghavan Mayur, president of TIPP, a unit of TechnoMetrica Market Intelligence, IBD's polling partner.
“Americans have been cheered by Wall Street’s rebound, and by a general feeling that the worst is behind us,” said Terry Jones, associate editor of Investor’s Business Daily. “But, despite massive spending on stimulus, businesses have shed four million jobs in the last year. Jobs data will thus likely be key to future shifts in consumer sentiment.”
This month, only eight of the 21 demographic groups that IBD/TIPP tracks were above 50 on the Economic Optimism Index. The highest index scores were for Democrats (64.7), and Black/Hispanic Americans (59.6) and households with incomes in the $30K to $50K range (54.7)
Eighteen groups improved on the index, while three groups declined.
On the Economic Outlook component, twelve of the groups IBD/TIPP tracks scored in optimistic territory. Nineteen groups advanced on the index, while two declined. The highest index scores were for Democrats (70.1), Black/Hispanic Americans (63.4), and Northeasterners (60.5).
On the Personal Financial component, 18 of the groups IBD/TIPP tracks scored in optimistic territory. Thirteen groups advanced on the index while eight groups declined.
On the Federal Policies component, only three of the 21 demographic groups tracked were above 50. Fourteen groups advanced on the index, while seven groups declined.