The IBD/TIPP Economic Optimism Index declined by 1.8 points, or 3.7%, in June posting 46.7 vs. 48.5 in May. The index is 2.6 points above its 12-month average of 44.1 and 2.3 points above its reading of 44.4 in December 2007 when the economy entered into the recession, and 3.2 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 912 adults from June 1 to June 8. The margin of error is +/-3.3 percentage points.
The IBD/TIPP Economic Optimism Index has three key components, all of which declined in June.
• The Six-Month Economic Outlook, a measure of how consumers feel about the economy’s prospects in the next six months, declined 3.6 points, or 7.1%, to 46.8. 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, declined 0.2 points, or 0.4%, to reach 56.1.
• Confidence in Federal Economic Policies, a proprietary IBD/TIPP measure of views on how government economic policies are working dropped 1.6 points, or 4.1%, to reach 37.1.
"Consumer confidence declined as the high unemployment persists,” said Raghavan Mayur, president of TIPP, a unit of TechnoMetrica Market Intelligence, IBD's polling partner. “According to our survey, 24% of households have at least one member of their household unemployed and looking for employment now which translates to approximately 30 million Americans. Forty-three percent say the economy is growing, while 54% think that the economy is slowing down or in a recession."
“The jobs numbers tell the tale: economic confidence is falling as job growth weakens,” said Terry Jones, associate editor of Investor’s Business Daily. “What was touted as a growing jobs recovery has run out of steam. Official unemployment in May inched up 8.2%, and has been above 8% for 40 straight months. Meanwhile the number of new jobs created has declined in each of the last four months.”
This month, four of the 21 demographic groups that IBD/TIPP tracks were above 50 on the Economic Optimism Index. Six groups increased on the index and fourteen groups declined on the index.
On the Economic Outlook component, five of the 21 groups that IBD/TIPP tracks scored in optimistic territory. Five groups improved this month and 16 groups declined.
On the Personal Financial component, nineteen of the groups IBD/TIPP tracks scored in optimistic territory. Eleven groups improved on the component and ten declined.
On the Federal Policies component, two of the 21 demographic groups tracked were above 50. Six groups advanced on the component and fourteen 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.
ABOUT INVESTOR'S BUSINESS DAILY (IBD)
Investor's Business Daily is a leading financial news and research organization recognized for proprietary stock screens, comparative performance ratings and a record of identifying stock leaders as they emerge. IBD’s companion website, Investors.com, offers stock tools and research for investors of every level. These include the IBD University learning center, IBD TV market videos and audio interviews, intraday reports on market action and the IBD Stock Checkup®. IBD hosts popular investment workshops and provides Home Study programs based on top-performing growth strategy, The CAN SLIM® Investing System. The newspaper was founded April 9, 1984 by William J. O’Neil, who originated the investing system that has outperformed major market indexes* for decades.
*The American Association of Individual Investors' independent "real time" study of 63 leading strategies found IBD’s CAN SLIM Investment System achieved an annualized return of +25.2% for the past 14 years (January 1998 through December 31, 2011, AAII Stock Screen). It is the #1 long-term growth strategy measured by AAII Journal.
IBD/TIPP Poll © 2012 Investor’s Business Daily Inc. and TechnoMetrica Inc.
© 2012 Investor's Business Daily, Inc. All rights reserved. Investor's Business Daily, IBD, and CAN SLIM and their corresponding logos are registered trademarks of Investor’s Business Daily, Inc.