The IBD/TIPP Economic Optimism Index, a leading national poll on consumer confidence, dropped across every category in October. The index overall fell by 5.8 percent to 50.3, its lowest point in the last 12 months. Despite the decline, the index remains in positive territory, continuing its longest stretch in more than a decade.
Separately, the Presidential Leadership Index and the National Outlook Index continued to fall. The Presidential Leadership Index fell 9.2 percent to 36.5, while the National Outlook Index dropped 8.7 percent to 39.7. Of particular note, respondents’ views of U.S. standing in the world plummeted by more than 20 percent while the reading on morals and ethics hit a historic low with a reading of 24.4. For all the IBD/TIPP indexes, a reading below 50 indicates pessimism, while a reading above 50 signals optimism.
The IBD/TIPP Economic Optimism Index has established a strong 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 887 adults from September 29 to October 8 using live interviewers and both cell phone and landline numbers. The margin of error is +/-3.4 percentage points. In addition to the Economic Optimism Index, IBD/TIPP surveyed respondents on key political issues for the Presidential Leadership Index and the National Outlook Index (see separate story here for details).
“This month, respondents showed increasing discomfort with the direction of the country and its leadership,” said Terry Jones, IBD's Commentary Editor. “Interestingly, the only subcategories that remain in positive territory are those that relate to individuals’ financial lives. This is likely because the stock market continues to perform well.”
The IBD/TIPP Economic Optimism Index has three key components. This month, all 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, couldn’t sustain its one month stint in positive territory. It fell from 51.1 to 48.7, a 4.7 percent drop. Nevertheless, this component remains above its 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, dropped four percent to 59.5, the lowest point since June 2017.
- Confidence in Federal Economic Policies, a proprietary IBD/TIPP measure of views on how government economic policies are working, decreased by 9.1 percent. The reading fell from 47.1 to 42.8.
"Despite this month’s sharp decline, our economic optimism index is still in positive territory, thus completing a twelve-month positive run,” noted Raghavan Mayur, president of TechnoMetrica, IBD's polling partner. “While the stock market is still rolling with the Trump momentum, the recent weak job numbers paint a mixed picture of the economy. The recent hurricanes have also taken their toll on the economy. Energy prices are key in the coming months to sustain a high level of confidence."
This month, 11 of the 21 demographic groups -- such as age, income, race and party preference -- that IBD/TIPP tracks were above 50 on the Economic Optimism Index. That’s down from 15 of 21 the month before. Just three groups improved on the index, while 18 declined.
On the Economic Outlook component, eight of the 21 groups that IBD/TIPP tracks scored in optimistic territory. Eight groups improved on the component while twelve declined. One did not change.
On the Personal Financial component, all of the 21 groups IBD/TIPP tracks scored in optimistic territory. Three groups increased while 18 declined.
On the Federal Policies component, one of the 21 demographic groups tracked was above 50. Four groups advanced on the component and 17 declined.
Correction: The IBD/TIPP Economic Optimism Index press release dated Aug. 8, 2017, had an incorrect number. It should have read: “The IBD/TIPP Economic Optimism Index, a leading national poll on consumer confidence, showed positive momentum this month, climbing 4.6 percent to 52.5 and above the 12-month average of 51. [The previous version said 52.2]
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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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