LOS ANGELES -- August 6, 2019 -- The IBD/TIPP Economic Optimism Index, a leading national poll on consumer confidence, decreased by 2.7 percent to 55.1 in August, erasing some of July’s positive gains. However, the index continues to break records, topping 35 consecutive months in positive territory. 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 902 adults from July 25 to August 1, 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 August indexes showcased another stunning month of across-the-board reversals in sentiment as all components on each index decreased.
This month the Presidential Leadership Index dropped by 9.5 percent. After a July surge, it has now returned to its lowest mark in six months, with a reading of 42.7. President Trump’s Job Approval rating took the sharpest hit on the index with a decline of 10.7 percent. The component’s reading sits at 41.8, its lowest reading since February while the Favorability reading is now its lowest level since October, falling 9.6 percent to 42.5.
After last month’s 4.1 percent increase, the National Outlook Index declined 5.4 percent, from 48.2 to 45.6. The biggest slip on the index came on the Morals and Ethics component, which fell 9.6 percent to a reading of 27.4. The Financial Related Stress Index increased slightly at just 0.6 percent. The latest reading of 49.2 still reflects below average financial stress. A reading below 50 on this index indicates that consumers feel less financial stress while a reading above 50 equals more financial stress.
“It’s been rare in the past for every component of every index to rise or fall within a given month, but it’s almost the norm under Trump,” said Terry Jones, IBD's commentary editor. “However, August marks the first month that Americans indicated concern about a possible recession, with 58 percent worried that a recession could begin within the next 12 months. This bears watching in the lead-up to the 2020 election, particularly amid fears about the long-term stability of the economy.”
The flagship IBD/TIPP Economic Optimism Index has three key components. This month, all three components decreased.
- The Six-Month Economic Outlook, a measure of how consumers feel about the economy’s prospects in the next six months, sits right at 50.0, a 3.1 percent decrease from July’s reading of 51.6. This keeps the index barely in positive territory, but substantially above 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, only went down by 0.8 percent, from 63.1 in July to 62.6 in August.
- Confidence in Federal Economic Policies, a proprietary IBD/TIPP measure of views on how government economic policies are working, fell 4.4 percent, moving from 55.0 last month to 52.6 this month.
“Despite a slight retreat in consumer confidence this month, Americans remain upbeat about economic conditions, buoyed by a resilient labor market that continues to create jobs at a healthy pace,” noted Raghavan Mayur, president of TechnoMetrica Market Intelligence, IBD's polling partner. “In fact, our survey indicates that the booming economy has translated into brighter consumer views on personal finances, as August marked the 20th consecutive month in which the Personal Financial Outlook has reached a score of 60 or higher. However, concerns are growing about a potential slowdown in the economy, largely driven by ongoing trade tensions between the U.S. and China, and the political uncertainty engendered by the upcoming 2020 election.”
This month, 16 of 21 demographic groups — such as age, income, race and party preference — that IBD/TIPP tracks were above 50 on the Economic Optimism Index. That is down from 19 in July, but up from 15 in June. Just five groups rose during the month, after all of them rose in July. In June, there was an across-the-board decline. In May, all rose.
On the Economic Outlook component, 11 of the 21 groups that IBD/TIPP tracks scored in optimistic territory, versus 13 in July, and four in June. In May, 18 were in the optimistic zone.
On the Personal Financial component, all 21 groups IBD/TIPP tracks remained in optimistic territory. Just seven groups rose, while 14 fell. In July, 17 rose and just four fell. In June, just three groups rose while 18 declined. Notably, the index stood at 62.6 in August, down from 63.1 in July, but still up from 61.1 in June. It’s below May’s 64.4, and the all-time high of 66.7 in October.
On the Federal Policies component, 12 of the 21 demographic groups tracked were above 50, down from 16 in July and equal to the 12 in June. In May, 17 were above 50. In August, just four of the 21 groups rose, down sharply from 19 in August. All of them fell in June. In May, 18 groups rose and three 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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