The IBD/TIPP Economic Optimism Index gained 1.9 points, or 4.1% in June, posting a reading of 47.7 vs. 45.8 in May. The index is 2.9 points above its 12-month average of 44.8, 3.3 points above its reading of 44.4 in December 2007 when the economy entered the recession, and 1.6 points below its all-time average of 49.3.
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 853 adults from May 27 to June 1. The margin of error is +/-3.4 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, gained 2.5 points, or 5.8%, to 45.6. 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, improved 1.3 points, or 2.3%, to 56.8.
•Confidence in Federal Economic Policies, a proprietary IBD/TIPP measure of views on how government economic policies are working, added 1.7 points, or 4.4%, to 40.6.
“Consumers became more optimistic on all aspects of the economy. Still 22% of households say at least one member is looking for a full-time job,” said Raghavan Mayur, president of TIPP, a unit of TechnoMetrica Market Intelligence, IBD's polling partner. “Forty-four percent think that the U.S. is still in a recession. Also, 51% feel the economy is not improving, while 47% believe it is.”
“The uptick in confidence may be related to the thawing out from a long, cold winter in the U.S.,” said Terry Jones, associate editor of Investor’s Business Daily. “Coming off a drop in economic output for the first quarter, it remains to be seen whether the economy’s momentum can be regained in time to avoid a recession.”
This month, five of the 21 demographic groups that IBD/TIPP tracks were above 50 on the Economic Optimism Index. Seventeen groups improved and four declined.
On the Economic Outlook component, two of the 21 groups that IBD/TIPP tracks scored in optimistic territory. Eighteen groups improved and three declined.
On the Personal Financial component, nineteen of the 21 groups IBD/TIPP tracks scored in optimistic territory. Twelve groups increased and nine decreased.
On the Federal Policies component, three of the 21 demographic groups tracked were above 50. Sixteen groups advanced on the component and five declined.