The IBD/TIPP Economic Optimism Index gained 4.6 points, or 9.9%, in October, posting a reading of 51.3 vs. 46.7 in September. The index is 3.8 points above its 12-month average of 47.5, 6.9 points above its reading of 44.4 in December 2007 when the economy entered the last recession, and 2.3 points above its all-time average of 49.0.
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 telephone poll of 934 adults from October 13 to October 20 using live interviewers and both cell phone and landlines. The margin of error is +/-3.3 percentage points.
The IBD/TIPP Economic Optimism Index has three key components. This month, all three of the index components improved.
• The Six-Month Economic Outlook, a measure of how consumers feel about the economy’s prospects in the next six months, climbed 10.1 points, or 25.1%, to 50.4. 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 gained 1.3 points, or 2.2%, to 59.9.
• Confidence in Federal Economic Policies, a proprietary IBD/TIPP measure of views on how government economic policies are working, gained 2.3 points, or 5.6%, to 43.5.
“Consumers are relieved that the end of the presidential election is finally in sight, and some even anticipate positive change coming to the country as a result of the contest,” said Raghavan Mayur, president of TechnoMetrica, IBD's polling partner. “Relatively low gas prices are also driving up consumer confidence levels.”
“No doubt there’s relief over the long campaign slog that has lasted well over a year,” said Terry Jones, Commentary editor at Investor’s Business Daily. “Change is often accompanied by a renewed sense of optimism, even sometimes when the change isn’t what someone wants.”
This month, 17 of the 21 demographic groups that IBD/TIPP tracks were above 50 on the Economic Optimism Index. All 21 groups improved on the index.
On the Economic Outlook component, 16 of the 21 groups that IBD/TIPP tracks scored in optimistic territory. All 21 groups improved on the component.
On the Personal Financial component, all 21 groups IBD/TIPP tracks scored in optimistic territory. Seventeen groups increased and four declined.
On the Federal Policies component, three of the 21 demographic groups tracked were above 50. Seventeen groups advanced on the component and three declined.