LOS ANGELES -- December 4, 2018 -- The IBD/TIPP Economic Optimism Index, a leading national poll on consumer confidence, declined 6.7 percent in December to an overall reading of 52.6. This is its lowest mark since April and its second consecutive month trending down. However, the index continues its record run in positive territory. The Economic Optimism Index has now spent 27 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 823 adults from November 26 to December 2, 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. After rising in the previous two months, December’s Presidential Leadership Index demonstrated a decline, moving from 43.9 to 42.7-- a 2.7 percentage drop.
The National Outlook Index also decreased, dipping 4.7 percent from 47.0 to 44.8. Notably, this index dropped 10.4 percent on the Morals & Ethics component, hitting its lowest point since December 2017 with a reading of 26.7. Additionally, the Financial Related Stress Index nudged down by 0.2 percent, from 52.5 to 52.4. A reading below 50 indicates that consumers feel less financial stress while a reading above 50 equals more financial stress.
“The mood of consumers seems to have soured slightly after bitter midterm elections, ongoing trade wars, significant layoffs at GM, and international turmoil,” said Terry Jones, IBD's Commentary Editor. “Americans are growing more concerned about their financial outlook, particularly over the next six months. While we’re nowhere near the panic stage, and are still maintaining higher than average economic optimism numbers, the ground is a little shakier.”
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, saw the sharpest decline as the reading hit its lowest point in the Trump presidency and returned to negative territory for the first time since April. It fell 12.8 percent, from 53.2 in November to 46.4 in December. 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, declined by 2.4 percent, moving from 62.3 in November to 60.8. 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, stayed just above the positive marker with a reading of 50.6, a decrease of 5.8 percent from November’s reading of 53.7.
“The stock market is a leading indicator of the economy. In a volatile market in October and November, many saw the gains they made during the year wiped out. A bear market could significantly degrade the economy,” noted Raghavan Mayur, president of TechnoMetrica, IBD's polling partner. “Uncertainty about trade policy and tariffs continued to be key factors in the decline of the index in December. Even with all of the ups and downs in recent months, the economy has been strong and relatively stable. But, now we could be starting to see some cracks develop that will bear watching. Historically, large changes in the six-month outlook component of our index have served as markers of turning points in the economy, signifying either the beginning or end of expansion ”
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. Only one group -- those earning less than $30,000 -- rose during the month, down sharply from six in November and 18 in October. Twenty groups fell during the month while one stayed the same.
On the Economic Outlook component, just three of the 21 groups that IBD/TIPP tracks scored in optimistic territory, down from 13 in the previous month.
On the Personal Financial component, all 21 groups IBD/TIPP tracks remained in optimistic territory, as six groups rose and the rest declined. However, in November, two groups were in pessimistic territory. In December, none were, despite the overall drop in the index. The overall index of 60.8 in December was down from 62.3 in November. The index hit an all-time high of 66.7 in October.
On the Federal Policies component, 11 of the 21 demographic groups tracked were above 50, down from 14 in November. Just three groups rose while 18 fell. A month earlier, 11 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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