The IBD/TIPP Economic Optimism Index fell 2.1 points, or 4.4% in July, posting a reading of 45.6 vs. 47.7 in June.  The index is 0.9 points above its 12-month average of 44.7, 1.2 points above its reading of 44.4 in December 2007 when the economy entered the recession, and 3.7 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 879 adults from June 24 to June 30. The margin of error is +/-3.4 percentage points.

The IBD/TIPP Economic Optimism Index has three key components.  This month, all three components declined.

     •The Six-Month Economic Outlook, a measure of how consumers feel about the economy’s prospects in the next six months, fell 4.0 points, or 8.8%, to 41.6.  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, lost 2.1 points, or 3.7%, to 54.7.

     •Confidence in Federal Economic Policies, a proprietary IBD/TIPP measure of views on how government economic policies are working, dropped 0.2 points, or 0.5%, to 40.4.

“Consumers are concerned about the outlook for the economy.  They expect to pay more at the pump because of the recent unrest in the Middle East.  A majority thinks that the economy is not improving.  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.

The Breakdown
 
This month, three of the 21 demographic groups that IBD/TIPP tracks were above 50 on the Economic Optimism Index. Five groups improved and sixteen declined.
 
On the Economic Outlook component, one of the 21 groups that IBD/TIPP tracks scored in optimistic territory.  Five groups improved and sixteen declined.
 
On the Personal Financial component, eighteen of the 21 groups IBD/TIPP tracks scored in optimistic territory. Six groups increased and fifteen decreased.  
 
On the Federal Policies component, three of the 21 demographic groups tracked were above 50.  Eleven groups advanced on the component and ten declined.

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