The IBD/TIPP Economic Optimism Index improved by 1.7 points, or 4.1%, in December, posting 43.1 vs. 41.4 in November. The index is 1.7 points below its 12-month average of 44.8, 1.3 points below its reading of 44.4 in December 2007 when the economy entered the recession, and 6.3 points below its all-time average of 49.4.
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 907 adults from November 21 to November 25. The margin of error is +/-3.3 percentage points.
The IBD/TIPP Economic Optimism Index has three key components. This month, all 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 2.9 points, or 7.6%, to 41.0. 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, edged up 0.4 points, or 0.8%, to 52.6.
•Confidence in Federal Economic Policies, a proprietary IBD/TIPP measure of views on how government economic policies are working, rose 1.9 points, or 5.6%, to 35.7.
“Consumer confidence continues to be in negative territory, for the fourteenth month in a row,” said Raghavan Mayur, president of TIPP, a unit of TechnoMetrica Market Intelligence, IBD's polling partner. “In the past thirteen years of our tracking, 2013 is only the second time the index has stayed in negative territory for a full year. 2010 was the first. Fifty percent think the U.S. is still in a recession, and 53% feel the economy is not improving. Further, six percent of households have at least one person whose work hours have been cut or limited to fewer than 30 hours per week in the past year due to ObamaCare.”
“Americans may be modestly more upbeat this month, but remain gloomier than they were when the economy entered recession in 2007,” said Terry Jones, associate editor of Investor’s Business Daily. “The only real bright spot is that a slim majority of Americans see their own personal financial outlook improving over the next 6 months, perhaps because they’re anticipating gridlock in Congress.”
This month, two of the 21 demographic groups that IBD/TIPP tracks were above 50 on the Economic Optimism Index. Eighteen groups improved and three declined.
On the Economic Outlook component, only two of the 21 groups that IBD/TIPP tracks scored in optimistic territory. Sixteen groups improved and five declined.
On the Personal Financial component, fifteen of the 21 groups IBD/TIPP tracks scored in optimistic territory. Eleven groups increased and ten decreased.
On the Federal Policies component, two of the 21 demographic groups tracked were above 50. Fourteen groups advanced on the component and seven declined.