The IBD/TIPP Economic Optimism Index slipped three-tenths of a point to 52.3 in early January, the lowest since December 2017. The government shutdown helped drag the overall index lower as confidence in federal economic policies fell to the lowest point since June.
The Economic Optimism Index remains modestly positive, above the neutral 50 level. But the six-month economic outlook gauge remained in pessimistic territory, edging up only slightly from December's two-year low. While average hourly wage growth hit a nine-year high of 3.2%, a roller-coaster ride for the Dow Jones and broader stock market kept optimism over personal finances in check.
Kroger (KR) CEO Rodney McMullen, at the National Retail Federation's annual trade show on Sunday, noted a split between economic optimism today vs. fears for the future.
"It's fascinating right now from a customer standpoint," McMullen said. "They feel incredibly good about the economy but very nervous about where things are headed."
The IBD/TIPP Poll reflects 903 responses from Jan. 3 to Jan. 12. The government shutdown began at midnight on Dec. 22.
The IBD/TIPP Economic Optimism Index often sees big swings around election results that may reflect partisan sentiment more than a change in economic conditions. But a second straight month of pessimism about the economic outlook suggests something else is dampening confidence.
The Economic Optimism Index has backtracked since hitting a 14-year high of 58.0 in August. Since then, pessimism has deepened slightly among Democrats (32.8 from 35.6), while optimism has taken a moderate hit among Republicans (74.2 from 80.5) and independents (50.9 from 57.2).
Economic Optimism Index Components
The Economic Optimism Index is a composite of three major subindexes. They track views of near-term prospects for the economy, the outlook for personal finances, and views of how well government economic policies are working.
The six-month outlook gauge for the economy rose four-tenths of a point to 46.8, after sliding 6.8 points in December. The subindex hit a 13-year high of 57.5 in February on the heels of tax cuts.
The six-month personal financial outlook index rose two-tenths of a point to 61.0. The October reading of 66.7, coming as the Dow Jones hit a record high just below 27,000, was a record high for the IBD/TIPP Poll, which dates back to 2001.
Meanwhile, the measure of confidence in federal economic policies slid 1.6 points to 49.0 as the length of the government shutdown set a record. The gauge hit a 13-year high of 53.7 in November.
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