The IBD/TIPP Economic Optimism Index dropped by 1.4 points, or 3.0%, in August posting 45.6 vs. 47.0 in July. The index is 0.2 points above its 12-month average of 45.4, 1.2 points above its reading of 44.4 in December 2007 when the economy entered into the recession, and 4.2 points below its all-time average of 49.8.
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 August 3 to August 10. The margin of error is +/-3.3 percentage points.
The IBD/TIPP Economic Optimism Index has three key components, two of which declined in August.
• The Six-Month Economic Outlook, a measure of how consumers feel about the economy’s prospects in the next six months, declined 1.1 points, or 2.4%, to 44.5. 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, improved 0.4 points, or 0.7%, to reach 55.5.
• Confidence in Federal Economic Policies, a proprietary IBD/TIPP measure of views on how government economic policies are working declined 3.6 points, or 8.9%, to reach 36.7.
"Rising gasoline prices and persisting high unemployment are not helping to build confidence. According to our survey, 24% of households have at least one member of their household unemployed and looking for employment," said Raghavan Mayur, president of TIPP, a unit of TechnoMetrica Market Intelligence, IBD's polling partner.
“Americans have been hit with a lot of bad news in recent weeks, from rising unemployment to a dramatic slowdown in economic growth,” said Terry Jones, associate editor of Investor’s Business Daily. “It will be tough for the economy to get off the deck if average people are retrenching, which is what this month’s data suggest.”
This month, four of the 21 demographic groups that IBD/TIPP tracks were above 50 on the Economic Optimism Index. Seven groups increased on the index and 14 groups declined on the index.
On the Economic Outlook component, three of the 21 groups that IBD/TIPP tracks scored in optimistic territory. Nine groups improved this month.
On the Personal Financial component, 19 of the groups IBD/TIPP tracks scored in optimistic territory. Twelve groups improved on the component and nine declined.
On the Federal Policies component, two of the 21 demographic groups tracked were above 50. Two groups advanced on the component and nineteen declined.
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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.
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