The IBD/TIPP Economic Optimism Index edged up by 0.3 points, or 0.6%, in July posting 47.0 vs. 46.7 in June. The index is 2.4 points above its 12-month average of 44.6 and 2.6 points above its reading of 44.4 in December 2007 when the economy entered into the recession, and 2.9 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 released later each month by the University of Michigan and The Conference Board. IBD/TIPP conducted the national poll of 915 adults from June 28 to July 6. The margin of error is +/-3.3 percentage points.
The IBD/TIPP Economic Optimism Index has three key components, two of which declined in July.
• The Six-Month Economic Outlook, a measure of how consumers feel about the economy’s prospects in the next six months, declined 1.2 points, or 2.6%, to 45.6. 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 1.0 point, or 1.8%, to reach 55.1.
• Confidence in Federal Economic Policies, a proprietary IBD/TIPP measure of views on how government economic policies are working improved 3.2 points, or 8.6%, to reach 40.3.
"The job situation is somewhat worsening," said Raghavan Mayur, president of TIPP, a unit of TechnoMetrica Market Intelligence, IBD's polling partner. “According to our survey, 28% of households have at least one member unemployed and looking for work. That’s the highest since May 2010 when we started tracking this measure. The number of Americans looking for a full-time job now is more than 35 million."
“The economy’s prospects appear to be crumbling, with job growth in the second quarter slashed in half despite the Fed’s zero interest rate policy and nearly $1 trillion in federal stimulus efforts,” said Terry Jones, associate editor for Investor’s Business Daily. “With no change in fiscal direction, consumers and investors may have to await the outcome of November’s election to know how the economy will fare in the future.”
This month, six of the 21 demographic groups that IBD/TIPP tracks were above 50 on the Economic Optimism Index. Eleven groups increased on the index and 10 groups declined on the index.
On the Economic Outlook component, four of the 21 groups that IBD/TIPP tracks scored in optimistic territory. Five groups improved this month.
On the Personal Financial component, 19 of the groups IBD/TIPP tracks scored in optimistic territory. Ten groups improved on the component and 11 declined.
On the Federal Policies component, three of the 21 demographic groups tracked were above 50. Nineteen groups advanced on the component and two declined.
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