The IBD/TIPP Economic Optimism Index dropped 1.7 points, or 3.5%, in September, posting a reading of 46.7 vs. 48.4 in August. The index is 0.4 points below its 12-month average of 47.1, 2.3 points above its reading of 44.4 in December 2007 when the economy entered the last recession, and 2.1 points below its all-time average of 48.8.
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 telephone poll of 934 adults from August 26 to September 1 using live interviewers and both cell phone and landlines. The margin of error is +/-3.3 percentage points.
The IBD/TIPP Economic Optimism Index has three key components. This month, two of the 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 4.4 points, or 9.8%, to 40.3. 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 gained 0.6 points, or 1.0%, to 58.6.
• Confidence in Federal Economic Policies, a proprietary IBD/TIPP measure of views on how government economic policies are working, lost 1.3 points, or 3.1%, to 41.2.
“Americans’ economic confidence retreated from last month’s bright disposition,” said Raghavan Mayur, president of TechnoMetrica, IBD's polling partner. “While the economic recovery entered its seventh year in June, confidence continues to be wobbly at best as reflected in persisting pessimism levels in our index for seventeen months in a row.”
“Job gains below expectation, general uneasiness related to the election, a stock market under pressure and recent increase in gasoline prices contribute to the decline,” Mayur added. “Fifty-two percent think the economy is not improving while 45% think it is improving. While 55% say that we are not in a recession, 41% believe we are in one.”
“The threats of Fed rate hikes and a mediocre jobs report have put a damper on optimism,” said Terry Jones, associate editor of IBD. “In coming weeks, the increasing noise of the presidential campaigns and continued market volatility will likely keep voters in an edgy mood.”
This month, four of the 21 demographic groups that IBD/TIPP tracks were above 50 on the Economic Optimism Index. Four groups improved and seventeen declined.
On the Economic Outlook component, none of the 21 groups that IBD/TIPP tracks scored in optimistic territory. Four groups improved and seventeen declined.
On the Personal Financial component, 20 of the 21 groups IBD/TIPP tracks scored in optimistic territory. Fourteen groups increased and seven declined.
On the Federal Policies component, two of the 21 demographic groups tracked were above 50. Four groups advanced on the component and 17 declined.