The IBD/TIPP Economic Optimism Index improved by 0.9 points, or 2.0% to 46.0 in September, up from 45.1 in August. The index is 0.9 points below its 12-month average of 46.9, 1.6 points above its reading of 44.4 in December 2007, when the economy entered the recession, and 3.6 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 904 adults from August 24 to August 28. 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 increased.
•The Six-Month Economic Outlook, a measure of how consumers feel about the economy’s prospects in the next six months, improved 0.1 points, or 0.2%, to 45.9. 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 0.5 points, or 0.9%, to 54.3.
•Confidence in Federal Economic Policies, a proprietary IBD/TIPP measure of views on how government economic policies advanced 2.0 points, or 5.6%, to 37.8.
“Despite a modest improvement in confidence, to many, the weak economic recovery continues to feel like a recession. For example, fifty-eight percent think that the U.S. is still in a recession. While 51% feel the economy is improving, 48% think the economy is not improving. Twenty-five 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.
“Even after this modest improvement, economic optimism remains below its long-term average and is still stuck in ‘pessimistic’ territory,” said Terry Jones, associate editor of Investor’s Business Daily. “The failure of any kind of meaningful jobs recovery weighs heavily on the economy right now, and optimism seems unlikely to improve until the jobs picture does.”
This month, four of the 21 demographic groups that IBD/TIPP tracks were above 50 on the Economic Optimism Index. Thirteen groups improved and eight declined.
On the Economic Outlook component, five of the 21 groups that IBD/TIPP tracks scored in optimistic territory. Ten groups improved and eleven declined.
On the Personal Financial component, sixteen of the 21 of the groups IBD/TIPP tracks scored in optimistic territory. Nine groups improved on the component and twelve declined.
On the Federal Policies component, only two of the 21 demographic groups tracked were above 50. Fifteen groups advanced on the component and six declined.