The IBD/TIPP Economic Optimism Index advanced by 2.0 points, or 4.9%, in May posting 42.8 vs. 40.8 in April. The index is 2.9 points below its 12-month average of 45.7 and 1.6 points below its reading of 44.4 in December 2007 when the economy entered into the recession, and 7.7 points below its all-time average of 50.5.

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 917 adults from May 1 to May 6. The margin of error is +/-3.3 percentage points.

The IBD/TIPP Economic Optimism Index has three key components, all of which gained in May.

• The Six-Month Economic Outlook, a measure of how consumers feel about the economy's prospects in the next six months, increased 3.5 points, or 9.0%, to 42.3. When compared to December 2007, the index shows a gain of 10.2 points.

• The Personal Financial Outlook, a measure of how Americans feel about their own finances in the next six months, advanced 1.8 points, or 3.7%, to reach 50.0.

• Confidence in Federal Economic Policies, a proprietary IBD/TIPP measure of views on how government economic policies are working rose 0.6 points, or 1.7%, to reach 36.1.

"Despite high gasoline and food prices, a high unemployment and underemployment, Americans' confidence surged due to the 'rally effect' sparked by the killing of Osama bin Laden," said Raghavan Mayur, president of TIPP, a unit of TechnoMetrica Market Intelligence, IBD's polling partner.

"The post-Osama rebound in optimism is clear," said Terry Jones, associate editor of Investor's Business Daily. "It remains to be seen, however, whether that gain can be sustained in the face of soaring prices, slow job growth and continued fights in Washington over spending and taxes."

The Breakdown

This month, only two of the 21 demographic groups that IBD/TIPP tracks were above 50 on the Economic Optimism Index. Sixteen groups advanced on the index.

On the Economic Outlook component, only one of the 21 groups that IBD/TIPP tracks scored in optimistic territory. Eighteen groups advanced and three declined.

On the Personal Financial component, ten of the groups IBD/TIPP tracks scored in optimistic territory. Sixteen groups advanced on the component and five declined.

On the Federal Policies component, only one of the 21 demographic groups tracked was above 50. . Eleven groups advanced on the component, eight declined, and one stayed at the same level as the previous month in May.

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