The IBD/TIPP Economic Optimism Index improved by 4.7 points, or 11.0%, in January posting 47.5 vs. 42.8 in December. The index is 5.0 points above its 12-month average of 42.5 and 3.1 points above its reading of 44.4 in December 2007 when the economy entered into the recession, and 2.4 points below its all-time average of 49.9.
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 January 2 to January 8. The margin of error is +/-3.3 percentage points.
The IBD/TIPP Economic Optimism Index has three key components, all of which increased in January.
• The Six-Month Economic Outlook, a measure of how consumers feel about the economy’s prospects in the next six months, increased 8.0 points, or 18.7%, to 50.8. The sub-index was 32.1 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, gained 2.9 points, or 5.5%, to reach 55.7.
• Confidence in Federal Economic Policies, a proprietary IBD/TIPP measure of views on how government economic policies are working rose 3.1 points, or 9.4%, to reach 36.0.
"Consumer confidence shows a good improvement this month as Americans become more optimistic about the six month economic outlook. Traditionally, 70% of the time in the past ten years confidence improves in January driven by New Year hopes," said Raghavan Mayur, president of TIPP, a unit of TechnoMetrica Market Intelligence, IBD's polling partner.
“The recent improvement in consumer sentiment is good to see, but sustaining the momentum will depend on job gains in the coming months,” said Terry Jones, associate editor of Investor’s Business Daily. “Recent gains in employment, while positive, remain well below the trend for past recoveries from recession.”
This month, five of the 21 demographic groups that IBD/TIPP tracks were above 50 on the Economic Optimism Index. Seventeen groups increased on the index.
On the Economic Outlook component, twelve of the 21 groups that IBD/TIPP tracks scored in optimistic territory. All but one group improved in January.
On the Personal Financial component, nineteen of the groups IBD/TIPP tracks scored in optimistic territory. Fifteen groups improved on the component and six declined.
On the Federal Policies component, nineteen of the 21 demographic groups tracked were below 50. Fourteen groups advanced on the component and seven declined.
* * *
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
ABOUT INVESTOR'S BUSINESS DAILY (IBD)
Founded in 1984, Investor's Business Daily helps new and seasoned investors safely build financial security.
Using the proprietary CAN SLIM® Investing System and time-tested signals based on a landmark study of over 130 years of market history, IBD provides alerts to emerging high-growth stocks and major changes in market direction. Created by legendary investor and IBD founder William J. O’Neil, the CAN SLIM System has been the #1 growth strategy from 1998 – 2010, gaining 2,487.3% vs. 29.6% for the S&P 500 in an independent, real-time study by the American Association of Individual Investors.*
Investors of all levels use IBD’s flagship newspaper (print and digital editions) and award-winning website, Investors.com, to spot early market trends, screen for winning stocks and get extensive, step-by-step training. IBD also offers investment workshops across the country, and provides both subscribers and non-subscribers with a free year-long investing course through the IBD Meetup program – America’s largest network of Meetup.com investing groups. In partnership with TechnoMetrica, IBD also conducts IBD/TIPP polls, including the nationally-recognized IBD/TIPP Economic Optimism Index. IBD/TIPP was the most accurate pollster in both the 2008 and 2004 presidential elections, according to final FEC-certified results of those elections. IBD is also recognized for its political and economic commentary and is home to editorial cartoonist Michael Ramirez, winner of the 2008 and 1994 Pulitzer Prize.
*The American Association of Individual Investors' independent "real time" study of over 50 leading strategies found IBD’s CAN SLIM Investment System achieved +2487.3% vs. S&P 500 +29.6% for the past 13 years (January 1998 through December 31 2010, AAII Stock Screen).
IBD/TIPP Poll © 2011 Investor’s Business Daily Inc. and TechnoMetrica Inc.
Investor's Business Daily, IBD, and CAN SLIM and their corresponding logos are registered trademarks of Investor’s Business Daily, Inc. © 2000-2011 Investor's Business Daily, Inc. All rights reserved.