The IBD/TIPP Economic Optimism Index continued its last month's decline further by 2.2 points, or 5.1%, in April posting 40.8 vs. 43.0 in March. The index is 5.5 points below its 12-month average of 46.3 and 3.6 points below its reading of 44.4 in December 2007 when the economy entered into the recession, and 9.7 points below its all-time average of 50.5. This month the index also undercuts it previous low of 41.1 in October 2008 during the sub-prime turmoil 30 months ago.
Note: Index readings above 50 indicate optimism; below 50 indicate pessimism.
The IBD/TIPP Economic Optimism Index has a good 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 poll of 903 adults from April 4 to April 10. The margin of error is +/-3.3 percentage points.
The IBD/TIPP Economic Optimism Index has three key components, all of which declined in April.
• The Six-Month Economic Outlook, a measure of how consumers feel about the economy's prospects in the next six months, dropped 0.9 points, or 2.3%, to 38.8, its 12-month low. When compared to December 2007, the index shows a gain of 6.7 points.
• The Personal Financial Outlook, a measure of how Americans feel about their own finances in the next six months, declined 2.0 points, or 4.0%, to reach 48.2, its 12-month low.
• Confidence in Federal Economic Policies, a proprietary IBD/TIPP measure of views on how government economic policies are working, fell 3.5 points, or 9.0%, to reach 35.5, its 12-month low.
"Over a short period of two months we have experienced an unprecedented erosion of 10-points in consumer confidence. High price for gasoline is the chief culprit. Seventy percent of Americans say they are affected by gasoline prices," said Raghavan Mayur, president of TIPP, a unit of TechnoMetrica Market Intelligence, IBD's polling partner.
"Americans have that sinking feeling again as they empty their wallets to pay their rising gasoline bills," said Terry Jones, associate editor of Investor's Business Daily. "Economic slumps and recessions often follow major jumps in energy prices. With more money being siphoned from the rest of economy to pay for energy, overall economic growth could be imperiled."
This month, only two of the 21 demographic groups that IBD/TIPP tracks were above 50 on the Economic Optimism Index. Seventeen groups declined on the index.
On the Economic Outlook component, only one of the 21 groups that IBD/TIPP tracks scored in optimistic territory. Twelve groups declined.
On the Personal Financial component, five of the groups IBD/TIPP tracks scored in optimistic territory. Four groups advanced on the component and seventeen declined.
On the Federal Policies component, only two of the 21 demographic groups tracked were above 50. Twenty groups declined in April.
ABOUT THE IBD/TIPP POLL
The IBD/TIPP Economic Optimism Index is the earliest take on consumer confidence each month and predicts with 80% 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 poll is generally conducted in the first week of the month.
For more information, go to www.tipponline.com
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IBD/TIPP Poll © 2011 Investor's Business Daily Inc. and TechnoMetrica Inc.