The IBD/TIPP Economic Optimism Index dropped by 0.3 points, or 0.7% in February, posting a reading of 44.9 vs. 45.2 in January. The index is 0.4 points above its 12-month average of 44.5, 0.5 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 49.4.
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 910 adults from January 25 to January 30. 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 decreased.
•The Six-Month Economic Outlook, a measure of how consumers feel about the economy’s prospects in the next six months, declined 0.5 points, or 1.1%, to 43.8. 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 2.0 points, or 3.6%, to 54.1.
•Confidence in Federal Economic Policies, a proprietary IBD/TIPP measure of views on how government economic policies are working, gained 1.7 points, or 4.8%, to 36.8.
“The economy and jobs continue to be the top issues on Americans’ minds,” said Raghavan Mayur, president of TIPP, a unit of TechnoMetrica Market Intelligence, IBD's polling partner. “Half of Americans think that the U.S. is still in a recession. And 53% feel the economy is not improving, while just 45% believe it is. The job situation continues to sap confidence, with 22% of households having at least one person looking for a full-time job.”
“If Obama were a student, he’d be struggling,” said Terry Jones, associate editor of Investor’s Business Daily. “Just 35% of those queried give President Obama a grade of A or B for his handling of the economy. And just 33% gave him above-average grades for creating jobs and 31% for his managing of the federal budget. His declining numbers could spell big trouble for fellow Democrats who face re-election in the fall.”
This month, two of the 21 demographic groups that IBD/TIPP tracks were above 50 on the Economic Optimism Index. Eight groups improved and thirteen declined.
On the Economic Outlook component, only two of the 21 groups that IBD/TIPP tracks scored in optimistic territory. Eight groups improved and thirteen declined.
On the Personal Financial component, fourteen of the 21 groups IBD/TIPP tracks scored in optimistic territory. Six groups increased and fourteen decreased. One group did not change.
On the Federal Policies component, only two of the 21 demographic groups tracked was above 50. Seventeen groups advanced on the component and four declined.