The IBD/TIPP Economic Optimism Index improved by 3.9 points, or 8.6%, in June, posting 49.0 vs. 45.1 in May. The index is 1.6 points above its 12-month average of 47.4, 4.6 points above its reading of 44.4 in December 2007 when the economy entered the recession, and 0.7 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 858 adults from May 28 to May 31. The margin of error is +/-3.4 percentage points.
The IBD/TIPP Economic Optimism Index has three key components. This month, two components advanced and one did not change.
• The Six-Month Economic Outlook, a measure of how consumers feel about the economy’s prospects in the next six months, improved 8.1 points, or 18.8%, to 51.2. 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 3.6 points, or 6.7%, to 57.6.
• Confidence in Federal Economic Policies, a proprietary IBD/TIPP measure of views on how government economic policies are working did not change and remained at 38.3.
“Rising home prices and strong performance of the stock market boost Americans’ confidence. Despite the improvement, one-half think that the U.S. is in a recession. While 55% feel the economy is improving, 41% think the economy is not improving. Twenty-six 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.
“For many Americans, personal finances are improving modestly, along with the economy,” said Terry Jones, associate editor of Investor’s Business Daily. “That said, confidence in government continues weak, and despite gains in the overall sentiment our Economic Optimism Index, at 49 in June, still remains in pessimistic territory. The stock market has become more volatile and choppy, so that continues to be an area to watch.”
This month, seven of the 21 demographic groups that IBD/TIPP tracks were above 50 on the Economic Optimism Index. Sixteen groups improved and five declined.
On the Economic Outlook component, thirteen of the 21 groups that IBD/TIPP tracks scored in optimistic territory. Eighteen groups improved and three declined.
On the Personal Financial component, twenty of the 21 of the groups IBD/TIPP tracks scored in optimistic territory. Seventeen groups improved on the component and four declined.
On the Federal Policies component, only one of the 21 demographic groups tracked was above 50. Ten groups advanced on the component and 11 declined.