LOS ANGELES -- September 4, 2018 -- The IBD/TIPP Economic Optimism Index, a leading national poll on consumer confidence, dropped across every component in September. Nevertheless, the overall reading remained in positive territory for a record 24th consecutive month. The September reading fell 4.0 percent, to 55.7 from 58.0. An index reading below 50 indicates pessimism while above 50 signals optimism for the IBD/TIPP indexes.
The IBD/TIPP Economic Optimism Index has established a strong track record of foreshadowing the confidence indicators issued later each month by the University of Michigan and The Conference Board. IBD/TIPP conducted its national telephone poll of 902 adults from August 23-August 30, 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 key political issues for the separate Presidential Leadership Index and National Outlook Index, as well as the Financial Related Stress Index. The Presidential Leadership Index fell 11.6 percent to 40.4 in September, which is one of the biggest monthly drops since IBD began tracking this index in January 2000. The National Outlook Index also declined, moving from 49.7 to 45.4, an 8.7 percent drop. Notably, the index’s Direction of the Country component exhibited a particularly large drop just a month after entering positive territory for the first time since January 2005. Its reading fell 11.3 percent, from 50.3 to 44.6. Additionally, the Financial Related Stress Index rose, which a negative result as a higher number indicates greater stress. The index moved from an all-time low of 47.4 to 51.3 -- a jump of 8.2 percent.
“Considering the roller coaster effect of the Trump presidency, September’s readings stand out. It is unusual for all the indexes and subindexes to fall so sharply, and even more so for this to happen as the economy performs well,” said Terry Jones, IBD's Commentary Editor. “Looking at the data, Trump took a big hit on the index components related to him, while broader economic components experienced modest ripples. For example, Trump’s Favorability rating fell 14.7 percent; Morals & Ethics fell 13.0 percent; Presidential Leadership fell 11.6 percent. The question is, was it just a bad month or a real turn in sentiment?”
The flagship IBD/TIPP Economic Optimism Index has three key components. This month, all three decreased.
- The Six-Month Economic Outlook, a measure of how consumers feel about the economy’s prospects in the next six months, declined 6.2 percent to 53.3 in September. This is substantially 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, decreased 3.8 percent, moving from 65.1 to 62.6.
- Confidence in Federal Economic Policies, a proprietary IBD/TIPP measure of views on how government economic policies are working, declined 1.5 percent to 51.3, though it still remains in positive territory.
“Americans remain highly upbeat about economic conditions in the country, despite concerns over rising consumer prices and trade tensions. Consumers’ animal spirits are being lifted by a roaring labor market that continues to create jobs at a robust pace. In the first seven months of 2018, job growth has averaged around 215,000 new payrolls a month, surpassing both 2017 and 2016 levels. In addition, the strong growth exhibited by the U.S. economy is being felt in the lives of everyday Americans, particularly in the form of larger take-home pay. It is not surprising, therefore, that a surge in consumer spending during the second quarter helped propel GDP growth to its fastest pace in four years,” noted Raghavan Mayur, president of TechnoMetrica, IBD's polling partner.
This month, 18 of 21 demographic groups -- such as age, income, race and party preference -- that IBD/TIPP tracks were above 50 on the Economic Optimism Index. Seventeen groups fell during the month, a reversal from August when 18 groups rose. Just four groups improved during the month, down from the 15 groups that improved in August.
On the Economic Outlook component, 15 of the 21 groups that IBD/TIPP tracks scored in optimistic territory. In the previous month, 18 groups were optimistic.
On the Personal Financial component, once again all 21 groups IBD/TIPP tracks remained in optimistic territory, as four groups rose and 17 declined. Last month, 16 groups increased and five declined. The overall index declined from its second-highest level ever in August.
On the Federal Policies component, 13 of the 21 demographic groups tracked were above 50. Eight groups rose, while 13 fell.
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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