The IBD/TIPP Economic Optimism Index rose to start March, as Americans in most of the country were much more upbeat about their own financial outlooks. But out West, pessimism has intensified as California gas prices rise at the fastest pace in at least 15 years.
The Economic Optimism Index is now 49.1, up from 47.5 a month earlier but below early January's 51.5, which was the first reading above the neutral 50 level since October 2012.
The index's three main components all rose in the past month.
The Personal Financial Outlook Index, measuring Americans' views about their own finances over the next six months, rose 4.4 points, or 8.2%, to 58.2. Aside from a matching reading in April 2014, it's the best showing since October 2012.
Broader Outlook Less Upbeat
The other subindexes were more muted. The Six-Month Economic Outlook Index edged up 0.2 point, or 0.4%, to 46.9. The Confidence in Federal Economic Policies Index advanced 0.2 point, or 0.5%, to 42.3.
"Gasoline prices are relatively lower as compared to last year," said Raghavan Mayur, president of TechnoMetrica, IBD's polling partner. "People have more money to spend or save. The stock market is also in a confirmed uptrend. More than one-half believe that the economy is improving and 56% feel we are not in a recession."
Thanks to lower gas prices and stronger wage gains, real disposable income shot up 0.9% in January after two months of solid 0.5% gains. U.S. gas prices have risen 40.5 cents in the past four weeks to $2.47 a gallon, according to the Energy Information Administration. But they are well off last summer's highs. The S&P 500 is near a record high, with the Nasdaq topping 5000 on Monday for the first time since March 2000.
It's a different story in the West. While the other regions showed modest to solid gains, the IBD/TIPP Economic Optimism Index fell 7.5 points, or 14.1%, to 45.8, in the West. It's the only demographic group to show a drop in the Personal Financial Outlook Index.
California Owns Its Culprit
The main culprit is gas prices, which have soared 80 cents in the past four weeks to $3.13 a gallon in the West, EIA says. California gas prices have shot up 98 cents, or 40% to $3.42, easily the biggest 4-week increase since at least 2000. California gas is up 46 cents in just the last week.
A Feb. 18 Exxon Mobil (NYSE:XOM) refinery explosion in Torrance, Calif., is a big factor, while a Tesoro (NYSE:TSO) refinery in Northern California has been shut amid an expanding nationwide union strike vs. refineries. The state's strict air-quality standards that require a special fuel blend make it difficult to import gas.
The West Coast port slowdown, recently resolved but which may take weeks to return to normal, also could be affecting the regional economy.
Nationwide, 41% say the U.S. is in a recession vs. 56% who say we aren't. But in the West, it's nearly even, 47% to 49%. Just two months ago, only 33% of Western respondents thought America was in a slump.
The Economic Optimism Index rose 0.2 point to 58.7 for Democrats, and 1.3 points to 37.9 for Republicans. But the big move was among pocketbook-oriented independents, which enjoyed a 3.9 point bump to 49.5, their best reading since January 2011.
The IBD/TIPP Poll of 898 adults was conducted Feb. 22-March 1.