The IBD/TIPP Economic Optimism Index slipped 1.2 points, or 2.5% in August, posting a reading of 46.9 vs. 48.1 in July. The index is 1.2 points below its 12-month average of 48.1, 2.5 points above its reading of 44.4 in December 2007 when the economy entered the recession, and 2.3 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 905 adults from July 25 to July 30. 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 index components declined.
• The Six-Month Economic Outlook, a measure of how consumers feel about the economy’s prospects in the next six months, dropped 1.8 points, or 4.0%, to 42.7. 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 2.4 points, or 4.3%, to 58.0.
• Confidence in Federal Economic Policies, a proprietary IBD/TIPP measure of views on how government economic policies are working, declined 4.3 points, or 9.7%, to 39.9.
“Americans are split on their assessment of current economic conditions – 47% believe it is improving, while 51% think it is not improving. Further, 42% believe we are in a recession and 51% say that we are not in a recession. Confidence is weakening among consumers amid increases in gasoline prices in some parts of the country. The stock market is also under pressure,” said Raghavan Mayur, president of TechnoMetrica, IBD's polling partner.
“Recent economic softness and market turmoil overseas seem to have hit Americans’ confidence hard, especially their confidence in federal policies” said Terry Jones, associate editor of Investor’s Business Daily. “And energy price declines, which usually act like a shot in the arm for consumer optimism, haven’t helped this time around.”
This month, four of the 21 demographic groups that IBD/TIPP tracks were above 50 on the Economic Optimism Index. Six groups improved and thirteen groups declined. Two did not change.
On the Economic Outlook component, three of the 21 groups that IBD/TIPP tracks scored in optimistic territory. Eight groups improved and 13 declined.
On the Personal Financial component, 20 of the 21 groups IBD/TIPP tracks scored in optimistic territory. Sixteen groups increased and five declined.
On the Federal Policies component, two of the 21 demographic groups tracked were above 50. Two groups advanced on the component and 19 groups declined.