The IBD/TIPP Economic Optimism Index maintained its September reading of 45.2 in October. The index is 0.1 points above its 12-month average of 45.1, 0.8 points above its reading of 44.4 in December 2007 when the economy entered the recession, and 4.0 points below its all-time average of 49.2.
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 889 adults from September 27 to October 3. The margin of error is +/-3.4 percentage points.
The IBD/TIPP Economic Optimism Index has three key components. This month, two of the three components improved.
• The Six-Month Economic Outlook, a measure of how consumers feel about the economy’s prospects in the next six months, improved 1.8 point, or 4.2%, to 44.6. 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, decreased 2.0 points, or 3.7%, to 52.5.
• Confidence in Federal Economic Policies, a proprietary IBD/TIPP measure of views on how government economic policies are working, rose 0.2 points, or 0.5%, to 38.5.
“For two years in a row, consumer confidence continues to be in the pessimistic territory. 44% believe that the economy is not improving and 39% still think that we are in a recession. Further, 20% 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.
This month, four of the 21 demographic groups that IBD/TIPP tracks were above 50 on the Economic Optimism Index. Nine groups improved and twelve declined.
On the Economic Outlook component, four of the 21 groups that IBD/TIPP tracks scored in optimistic territory. Thirteen groups improved and eight declined.
On the Personal Financial component, sixteen of the 21 groups IBD/TIPP tracks scored in optimistic territory. Five groups increased and fourteen decreased. Two did not change.
On the Federal Policies component, one of the 21 demographic groups tracked were above 50. Ten groups advanced on the component and eleven declined.