The IBD/TIPP Economic Optimism Index declined by 1.1 points, or 2.4%, in May, posting 45.1 vs. 46.2 in April. The index is 2.1 points below its 12-month average of 47.2, 0.7 points above its reading of 44.4 in December 2007 when the economy entered the recession, and 4.6 points below its all-time average of 49.7.
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 825 adults from April 30 to May 5. The margin of error is +/-3.5 percentage points.
The IBD/TIPP Economic Optimism Index has three key components. This month, two components declined and one improved.
- The Six-Month Economic Outlook, a measure of how consumers feel about the economy's prospects in the next six months, declined 4.0 points, or 8.5%, to 43.1. 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 1.1 points, or 2.1%, to 54.0.
- Confidence in Federal Economic Policies, a proprietary IBD/TIPP measure of views on how government economic policies are working edged down 0.2 points, or 0.5%, to reach 38.3.
"A majority of Americans continue to believe that the U.S. is in a recession. While 47% feel the economy is improving, 49% think the economy is not improving. Twenty-three percent of households have at least one person looking for full-time employment," said Raghavan Mayur, president of TIPP, a unit of TechnoMetrica Market Intelligence, IBD's polling partner.
"The economy has failed to ignite in the five years since the financial crisis," said Terry Jones, associate editor of Investor's Business Daily. "While Americans are more confident about their own finances, they're much less confident about the future – and about the government's ability to get the economy back on track."
This month, three of the 21 demographic groups that IBD/TIPP tracks were above 50 on the Economic Optimism Index. Five groups improved and sixteen declined.
On the Economic Outlook component, three of the 21 groups that IBD/TIPP tracks scored in optimistic territory. Four groups improved and sixteen declined. One did not change.
On the Personal Financial component, 18 of the 21 of the groups IBD/TIPP tracks scored in optimistic territory. Twelve groups improved on the component and nine declined.
On the Federal Policies component, three of the 21 demographic groups tracked were above 50. Twelve groups advanced on the component and eight declined. One did not change.