The IBD/TIPP Economic Optimism Index declined by 2.0  points, or 4.2%, in August, posting 45.1 vs. 47.1 in July.  The index is 2.2 points below its 12-month average of 47.3, 0.7 points above its reading of 44.4 in December 2007 when the economy entered the recession, and 4.5 points below its all-time average of 49.6.

 

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 901 adults from July 29 to August 3. The margin of error is +/-3.3 percentage points.

The IBD/TIPP Economic Optimism Index has three key components.  This month, all the three components declined.

  •The Six-Month Economic Outlook, a measure of how consumers feel about the economy’s prospects in the next six months, declined 2.3 points, or 4.8%, to 45.8.  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, dropped 2.3 points, or 4.1%, to 53.8.
 
  •Confidence in Federal Economic Policies, a proprietary IBD/TIPP measure of views on how government economic policies fell 1.4 points, or 3.8%, to 35.8.

“Despite improvements in the employment data last week, our poll shows a decline in Americans’ confidence.  To many, the weak economic recovery continues to feel like a recession.  For example, 56% think that the U.S. is still in a recession. While 48% feel the economy is improving, 50% think the economy is not improving.  Twenty-four 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.

“These data clearly show that, for most Americans, there is once again no ‘recovery summer’,” said Terry Jones, associate editor of Investor’s Business Daily. “It will be hard for sluggish growth to pick up in the face of declining public confidence in both the six-month economic outlook and the government’s ability to handle America’s many economic problems.”
 
The Breakdown

This month, two of the 21 demographic groups that IBD/TIPP tracks were above 50 on the Economic Optimism Index. Two groups improved, 18 declined, and one did not change.
 
On the Economic Outlook component, four of the 21 groups that IBD/TIPP tracks scored in optimistic territory.   Four groups improved and 17 declined.

On the Personal Financial component, 17 of the 21 of the groups IBD/TIPP tracks scored in optimistic territory. Three groups improved on the component and 18 declined.  

On the Federal Policies component, only two of the 21 demographic groups tracked were above 50.  Seven groups advanced on the component and 14 declined.

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