The IBD/TIPP Economic Optimism Index dipped 1.5 points to 54.2 in early April, even as the Dow Jones neared record territory. The overall index still indicates that Americans are moderately optimistic. Yet views of the near-term economic outlook turned slightly negative.
The subindex tracking views of the six-month economic outlook fell 2.8 points to 48.8. Readings above the neutral 50 level reflect optimism.
The reading indicates some backsliding after the IBD/TIPP Economic Optimism Index saw its biggest one-month jump since 2012 in early March. That came as the Dow Jones and broader stock market rally extended their post-Christmas rebound and the government shutdown receded further into memory.
The softer reading in April isn't a surprise. The IBD/TIPP Poll reflects 902 responses from March 28 to April 6. Most of the polling came before Friday's stronger-then-expected jobs report that showed 196,000 new jobs in March. Recession talk had spiked in the prior weeks. First, the Labor Department reported just 20,000 new jobs in February, later revised to 33,000. Then the Fed took rate hikes off the table for 2019 and the Treasury yield curve inverted, though only briefly. That's often a recession precursor, though probably not this time. Lower long-term interest rates are a plus for the consumer and the housing market.
The Dow Jones and other averages met resistance in March, only hitting fresh 2019 highs last week. But that was too late to buoy investor sentiment in the IBD/TIPP Poll. The Economic Optimism Index fell 2.5 points to 56.7 among self-described investors. Among noninvestors, the reading climbed 2 points to 51.7, the highest since last November.
Economic Optimism Has Softened
The IBD/TIPP Economic Optimism Index backtracked after hitting a 14-year high of 58 in August, having ridden an economic surge courtesy of the Trump tax cuts and federal spending stimulus. The index hit a 16-month low of 50.3 in February. Most of the damage to economic optimism came after the November elections that saw a return of divided government, leading to the government shutdown. The stock market sold off sharply in the fourth quarter. Now the Dow Jones and S&P 500 are near record highs after a great first quarter, but economic optimism hasn't rebounded as strongly.
Economic Optimism Index Components
The IBD/TIPP Economic Optimism Index is a composite of three major subindexes. They track views of near-term economic prospects, the outlook for personal finances, and views of how well government economic policies are working.
The six-month outlook gauge for the economy fell 2.8 points to 48.8. It had rebounded back into optimistic territory in March, after falling in February to the lowest level since September 2016. The subindex hit a 13-year high of 57.5 in February 2018 on the heels of tax cuts.
The six-month personal financial outlook index dipped two-tenths of a point to 62.4. The October reading of 66.7, coming as the Dow Jones hit a record high just below 27,000, was an all-time best for the IBD/TIPP Poll, which dates back to 2001.
Meanwhile, the measure of confidence in federal economic policies slipped 1.4 points to 51.5. The gauge hit a 13-year high of 53.7 in November, then slumped and recovered as the government shutdown came and went.
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