LOS ANGELES -- November 5, 2018 -- The IBD/TIPP Economic Optimism Index, a leading national poll on consumer confidence, declined 2.4 percent in October to an overall reading of 56.4. The decrease was largely attributed to a 6.6 percentage drop in the Personal Financial Outlook component of the index. The index continues its record run in positive territory, however. The Economic Optimism Index has now spent 26 consecutive months above 50. An index reading below 50 for the IBD/TIPP indexes indicates pessimism, while above 50 signals optimism.
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 900 adults from October 25 to November 3, 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 rose for the second consecutive month, moving from 43.1 to 43.9 -- a 1.9 percentage increase. The National Outlook Index decreased 2.1 percent, dipping from 48.0 to 47.0, while the Financial Related Stress Index increased to 52.5, its highest point since April 2018, indicating that consumers feel more financial stress.
“November’s respective indexes continue to showcase the ups and downs in sentiment of the past year, indicative of the rapidly changing tides in the political climate,” said Terry Jones, IBD's Commentary Editor. “What’s different this month is that declines across the index reflect some financial concern. The economy has buoyed sentiment in recent months, but this month, while Trump’s numbers are up, people are slightly more concerned about their financial outlook. It’s not a drastic change, but it bears watching moving forward.”
The flagship IBD/TIPP Economic Optimism Index has three key components. This month, two of the three decreased, while one increased.
- The Six-Month Economic Outlook, a measure of how consumers feel about the economy’s prospects in the next six months, dipped slightly from 53.3 in October to 53.2 in November (-0.2 percent). This remains 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, dropped the most of the three components just one month after hitting its highest reading of the Trump presidency. November’s reading of 62.3 reflects a 6.6 percent drop from October’s 66.7. Nevertheless, the reading remains in positive territory and above its long-term average of 57.3.
- Confidence in Federal Economic Policies, a proprietary IBD/TIPP measure of views on how government economic policies are working, increased slightly, moving from 53.4 to 53.7. With a 0.6 percentage gain, it marks a new high reading for the Trump presidency.
“Most Americans acknowledge and give credit to President Trump for his handling of the economy and jobs. The stock market correction, uncertainties about the outcome of the midterm elections on Tuesday, and tariffs are key factors that contribute to the decline of the index,” noted Raghavan Mayur, president of TechnoMetrica, IBD's polling partner.
“As people head to the polls, Democrats have an edge on the generic ballot with likely voters. The key issues according to voters are health care, the economy, national security, immigration, trade, and climate change,” Mayur said. “Depending on the election outcomes, we could see significant movement on next months indexes.”
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. Just six groups rose during the month, down sharply from 18 in October. Fourteen groups fell during the month, while one stayed the same.
On the Economic Outlook component, 13 of the 21 groups that IBD/TIPP tracks scored in optimistic territory, the same as in the previous month.
On the Personal Financial component, 19 of 21 groups IBD/TIPP tracks remained in optimistic territory, as 20 groups rose and just one declined. It was the first time since December of 2017 that not all the indexes were in optimistic territory. Just two groups rose for the month, while 18 declined and one stayed the same. The overall index of 62.3 in November was down from the all-time high at 66.7, which was set the month before.
On the Federal Policies component, 14 of the 21 demographic groups tracked were above 50. Eleven groups rose, while 10 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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