LOS ANGELES -- February 5, 2019 -- The IBD/TIPP Economic Optimism Index, a leading national poll on consumer confidence, dropped 3.8 percent in February, hitting its lowest point since October 2017. Its reading of 50.3 comes amid the recent government shutdown and as consumers brace for a second shutdown amid the budget stalemate.
This month’s poll saw Economic Optimism fall for the fourth consecutive month. Nevertheless, the index continues its record run in positive territory. The Economic Optimism Index has now spent 29 consecutive months above 50. An index reading below 50 for the IBD/TIPP indexes indicates pessimism while above 50 signals optimism.
The IBD/TIPP Economic Optimism Index has established a strong track record of foreshadowing the confidence indicators issued later each month by the University of Michigan and The Conference Board. IBD/TIPP conducted its national telephone poll of 904 adults from January 24 to February 1, using live interviewers and both cell phone and landline numbers. The margin of error is +/-3.3 percentage points.
In addition to the Economic Optimism Index, IBD/TIPP surveyed respondents on key political issues for the separate Presidential Leadership Index and National Outlook Index, as well as the Financial Related Stress Index. Each index took a hit in February. This rare occurrence, in which every component across every index dropped, has now happened twice during the Trump presidency. February’s poll saw the Presidential Leadership Index fall by 4.8 percent, moving from 44.0 in January to 41.9 this month. The Job Approval component of the index fell by a substantial 8.0 percent.
The National Outlook Index decreased even more, falling from 44.4 last month to 41.9 in February -- a 5.6 percentage drop. While every measure of the index went down, two components experienced a double-digit plunge: Direction of the Country, which slid by 12.3 percent, and Morals and Ethics, which dropped 13.9 percent.
The Financial Related Stress Index rose to its highest level since October 2017. Stress increased by 6.8 percent, hitting 55.3. A reading below 50 on this index indicates that consumers feel less financial stress while a reading above 50 equals more financial stress.
“This month, the effects of the shutdown are becoming more apparent. American sentiment reflects disapproval of how the government is operating from both sides of the aisle. There is also uneasiness about another shutdown looming just over the horizon,” said Terry Jones, IBD's Commentary Editor. “Still, and perhaps despite it all, the economy is holding steady as we saw from the latest jobs report. If a second extended shutdown happens, however, we could see a harsher picture in March’s data.”
The flagship IBD/TIPP Economic Optimism Index has three key components. This month, all three decreased.
- The Six-Month Economic Outlook, a measure of how consumers feel about the economy’s prospects in the next six months, dropped 4.9 percent to 44.5. The component remains in negative territory for the third consecutive month. Still, this reading is substantially above the 32.1 reading 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, dipped by 1.6 percent to a reading of 60.0. This is its lowest reading in more than a year.
- Confidence in Federal Economic Policies, a proprietary IBD/TIPP measure of views on how government economic policies are working, fell the most. It moved from 49.0 to 46.3 -- a 5.5 percentage drop. This also marks the third month in a row that this measure has decreased.
“Though our economic optimism index fell, it is still above 50 in the positive zone. This despite the longest government shutdown in history,” noted Raghavan Mayur, president of TechnoMetrica, IBD's polling partner. “The economy is roaring and the job market is strong. Gasoline prices are low and this helps to offset any price increases due to trade wars. However, Americans are experiencing an increase in financial stress.”
This month, 10 of 21 demographic groups -- such as age, income, race, and party preference -- that IBD/TIPP tracks were above 50 on the Economic Optimism Index. That was down from 15 in January. Four groups rose during the month, down from eight in January but up from just one in December. Seventeen groups fell during the month.
On the Economic Outlook component, just two of the 21 groups that IBD/TIPP tracks scored in optimistic territory, down from six in January and from three in December. Thirteen groups were optimistic in November.
On the Personal Financial component, all 21 groups IBD/TIPP tracks remained in optimistic territory, as eight groups rose, one stayed the same and the rest declined. Even Democrats returned to optimistic territory, despite the government shutdown. The index stood at 60 in February, after hitting an all-time high of 66.7 in October.
On the Federal Policies component, four of the 21 demographic groups tracked were above 50, down from seven in January and 11 in December. Just three groups rose while 17 fell in February, and one stayed the same.
ABOUT THE IBD©/TIPP POLL
The IBD/TIPP Economic Optimism Index is the earliest take on consumer confidence each month and predicts with good reliability monthly changes in sentiment in well-known polls by The Conference Board and the University of Michigan. The IBD/TIPP Economic Optimism Index is based on a survey of 900-plus adults chosen at random nationwide. The national poll is generally conducted in the first week of the month by live interviewers and both cell phone and landlines.
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