The IBD/TIPP Economic Optimism Index, a leading national poll on consumer confidence, indicates that consumer confidence overall dropped 2.1 percent over the last month, yielding a reading of 50.2, down from the June reading at 51.3. This is below the 12-month average of 51. Nevertheless, buoyed by an increase in satisfaction with one’s personal financial outlook, this marks the tenth consecutive month the overall index reading is above 50, which indicates optimism.
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 900 adults from June 23 to June 29 using live interviewers and both cell phone and landline numbers. The margin of error is +/-3.3 percentage points. In addition to the Economic Optimism Index, IBD/TIPP surveyed respondents on issues of presidential leadership and key political issues (see separate story here for details).
“Overall, economic optimism remained positive for the 10th straight month, but just barely so," said Terry Jones, IBD's Commentary Editor. "Strong job gains are a big reason why Americans are increasingly confident about their own personal finances. But the ongoing dysfunction in Washington over replacing ObamaCare and reforming the tax code continues to push overall optimism down.”
The IBD/TIPP Economic Optimism Index has three key components. This month, two of the three index components decreased.
- The Six-Month Economic Outlook, a measure of how consumers feel about the economy’s prospects in the next six months, returned to negative territory, decreasing 5.5 percent to 48.4 from June’s 51.2. This represents the lowest reading in 10 months, but remains higher than the 32.1 reading 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, increased for the second consecutive month, climbing from 57.2 to 60.0 -- a 4.9 percent jump.
- Confidence in Federal Economic Policies, a proprietary IBD/TIPP measure of views on how government economic policies are working, experienced the sharpest drop, falling seven percent to 42.2 from 45.4.
“While our index has posted positive sentiment for 10 consecutive months, continuing its longest stretch in the past decade, sustaining the spirit will be challenging,” noted Raghavan Mayur, president of TechnoMetrica, IBD's polling partner “Americans expect Trump to deliver on his campaign promises. Factors that help the index on the positive side are a strong job market and relatively low gasoline prices. The stock market has also been under pressure, with the recent wobbliness of tech stocks concerning many -- if it is a harbinger of an impending correction. International events such as North Korea may also affect the future direction.”
This month, 12 of the 21 demographic groups that IBD/TIPP tracks were above 50 on the Economic Optimism Index. Nine groups improved on the index, while 10 declined. Two groups maintained the same reading. This is the sharpest change since Trump took office in January, when 20 of the 21 demographic groups -- such as age, income, race and party preference -- tracked by the IBD/TIPP Poll were above 50 on the Economic Optimism Index and 15 groups expressed increased optimism.
On the Economic Outlook component, 11 of the 21 groups that IBD/TIPP tracks scored in optimistic territory. Ten groups improved on the component while 11 declined.
On the Personal Financial component, 18 groups IBD/TIPP tracks scored in optimistic territory. Eleven groups increased while 10 declined.
On the Federal Policies component, three of the 21 demographic groups tracked were above 50. Seven groups advanced on the component and 14 declined.
ABOUT THE IBD©/TIPP POLL
The IBD/TIPP Economic Optimism Index is the earliest take on consumer confidence each month and predicts with good reliability monthly changes in sentiment in well-known polls by The Conference Board and the University of Michigan. The IBD/TIPP Economic Optimism Index is based on a survey of 900-plus adults chosen at random nationwide. The national poll is generally conducted in the first week of the month by live interviewers and both cell phone and landlines.
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