The IBD/TIPP Economic Optimism Index gained 2.0 points, or 4.3% in December, posting a reading of 48.4 vs. 46.4 in November. The index is 2.4 points above its 12-month average of 46.0, 4.0 points above its reading of 44.4 in December 2007 when the economy entered the recession, and 0.8 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 904 adults from December 1 to December 7. The margin of error is +/-3.3 percentage points.
The IBD/TIPP Economic Optimism Index has three key components. This month, all 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 3.4 points, or 7.5%, to 48.5. 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, increased 0.2 points, or 0.4%, to 56.4.
• Confidence in Federal Economic Policies, a proprietary IBD/TIPP measure of views on how government economic policies are working, climbed 2.4 points, or 6.3%, to 40.2.
“On the positive side, Americans are upbeat in December and hopefully the upward trend will continue in 2015,” said Raghavan Mayur, president of TIPP, a unit of TechnoMetrica Market Intelligence, IBD's polling partner. “However, for twenty-six months in a row, consumer confidence continues to be in the pessimistic territory. 42% believe that the economy is not improving and 38% still think that we are in a recession.”
“Consumer sentiment appears to be firming up, perhaps as a result of the mid-term elections,” said Terry Jones, associate editor of Investor’s Business Daily. “Americans seem to be expecting a change of course in Congress from the big winners of that election, the Republicans. Whether that happens will have profound implications for the economy and the 2016 presidential contest.”
This month, seven of the 21 demographic groups that IBD/TIPP tracks were above 50 on the Economic Optimism Index. Fourteen groups improved and seven declined.
On the Economic Outlook component, eight of the 21 groups that IBD/TIPP tracks scored in optimistic territory. Sixteen groups improved and five declined.
On the Personal Financial component, eighteen of the 21 groups IBD/TIPP tracks scored in optimistic territory. Eleven groups increased and nine declined. One did not change.
On the Federal Policies component, two of the 21 demographic groups tracked were above 50. Fifteen groups advanced on the component and five declined. One did not change.