The IBD/TIPP Economic Optimism Index improved by 2.1 points, or 4.9% in January, posting a reading of 45.2 vs. 43.1 in December. The index is 0.5 points above its 12-month average of 44.7, 0.8 points above its reading of 44.4 in December 2007 when the economy entered the recession, and 4.2 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 901 adults from January 4 to January 7. The margin of error is +/-3.3 percentage points.
The IBD/TIPP Economic Optimism Index has three key components. This month, two of 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 3.3 points, or 8.0%, to 44.3. 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 3.5 points, or 6.7%, to 56.1.
•Confidence in Federal Economic Policies, a proprietary IBD/TIPP measure of views on how government economic policies are working, declined 0.6 points, or 1.7%, to 35.1.
“Consumer confidence continues to be in negative territory, for the fifteenth month in a row. Fifty-one percent think that the U.S. is still in a recession. While 50% feel the economy is not improving, 49% think the economy is improving. The job situation is still weighing on the confidence – 26% of households have at least one person looking for a full-time job,” said Raghavan Mayur, president of TIPP, a unit of TechnoMetrica Market Intelligence, IBD's polling partner.
“It’s always welcome to see even modest improvement in consumer confidence,” said Terry Jones, associate editor of Investor’s Business Daily. “But with more than 30 million people still looking for full-time work and confidence remaining in pessimistic territory, the economy’s recovery still isn’t satisfactory.”
This month, four 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, only three of the 21 groups that IBD/TIPP tracks scored in optimistic territory. Eighteen groups improved and three declined.
On the Personal Financial component, eighteen of the 21 groups IBD/TIPP tracks scored in optimistic territory. Seventeen groups increased and four decreased.
On the Federal Policies component, only one of the 21 demographic groups tracked was above 50. Seven groups advanced on the component and fourteen declined.