The Pulse

After September Surge, Economic Optimism Plunges In October 

Every component of the Economic Optimism, Presidential Leadership and National Outlook indexes declined as financial stress ticked back up

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.

LOS ANGELES–(BUSINESS WIRE)–The IBD/TIPP Economic Optimism Index, a leading national poll on consumer confidence, fell from 44.7 in September to 41.6 in October– a change of 6.9%. This kept the index in negative territory for the 14th consecutive month. A reading above 50.0 signals optimism and below 50.0 indicates pessimism on IBD/TIPP indexes.

For the latest index, IBD/TIPP surveyed 1,376 adults October 5-October 7. The poll was conducted online using TechnoMetrica’s network of panels to provide the sample. IBD/TIPP also surveyed respondents on key political issues for the separate Presidential Leadership Index and National Outlook Index, as well as the Financial Related Stress Index.

The Presidential Leadership Index declined by 6.8% in October. Its overall reading of 45.1 dipped from last month’s 48.4 but remained above the readings for August (41.4), July (44.5), June (42.7) and May (44.7). Each individual component of the index fell, with Job Approval losing the most ground; its reading of 49.0 in September moved to 45.3 in October– a 7.6% drop.

The National Outlook Index slipped in October as well. Its reading of 41.4 fell 6.8% from September’s 44.4. Although every component of the index declined this month, it still maintained the second-highest overall reading over the last six months, behind September’s surge. In terms of specific components, Morals & Ethics dropped the most, moving from 37.1 in September to 34.0 in October– an 8.4% decline– while the Quality of Life component dipped back into negative territory this month at 47.6 after spending September at a positive 51.8.

Financial Related Stress increased by 2.8% in October, moving from 67.6 in September– its lowest reading since March 2022– to 69.5. A reading over 50.0 on this index equals more financial stress while a reading below 50.0 indicates consumers feel less stress. The index was last below 50.0 in February 2020 (48.1).

“The optimism we saw rising last month wasn’t fully erased in October, but it did take quite a hit,” said Ed Carson, IBD’s news editor. “Any time every component on every index declines, it draws attention, but the dips this month were smaller than last month’s significant gains. Rather than extending September’s optimism, consumers seem to be acknowledging ‘We’re not out of the woods yet.’ They’re ruminating about the effects of economic instability on their lives and how such instability may persist. This is reflected in the more negative sentiment.”

The flagship IBD/TIPP Economic Optimism Index has three key components. In October, all three declined.

  • The Six-Month Economic Outlook, a measure of how consumers feel about the economy’s prospects in the next six months, fell by 10.4% in October after last month’s massive 21.2% increase. The component dropped to 35.4 this month, down from 39.5 in September.
  • The Personal Financial Outlook, a measure of how Americans feel about their own finances in the next six months, returned to negative territory in October. The component moved from 52.0 last month to 48.2 this month– a 7.3% decline.
  • Confidence in Federal Economic Policies, a proprietary IBD/TIPP measure of views on how government economic policies are working, dipped 3.5%, shifting from 42.7 in September to 41.2 in October.

“More than half (51%) of Americans view the economy as the top political issue, with 75% of families worried about maintaining their standard of living. Inflation remains a heavy concern for 90% of Americans while 87% are troubled by the possibility of a recession (61% believe we are already there),” said Raghavan Mayur, president of TechnoMetrica, who directed the poll. “The alarm bells are sounding in Washington. Economic policy should stay in the forefront, with voters paying close attention to what steps are– and are not– being taken to protect American pocketbooks, particularly in the wake of OPEC’s announcement that it will cut oil production, which is likely to cause gas prices to rise even higher.”

Economic Optimism Index Breakdown

Any time every component on every index declines, it draws attention, but the dips this month were smaller than last month’s significant gains...

This month, six of 21 demographic groups— such as age, income, race and party preference — that IBD/TIPP tracks were above 50.0, in positive territory, on the Economic Optimism Index. That’s the same as in September, vs. just one in August, three in July, one in June, four in May and seven in April. Just five groups rose in October vs. all 21 in September, 11 in August, 10 in July, three in June, one in May and 20 in April.

For the Six-Month Economic Outlook component, just one of the 21 groups that IBD/TIPP tracks scored in optimistic territory vs. three in September, none in June to August, just one in May and three in April. Optimism over the economy’s six-month outlook rose for five groups vs. all 21 in September, 10 in August, 16 in July, five in June, zero in May and 20 in April.

For the Personal Financial component, nine groups IBD/TIPP tracks were in optimistic territory vs. 13 in September, seven in August and July, six in June, nine in May and 14 in April. Just three groups rose vs. all 21 in September, 11 in August, nine in July, two in June, six in May and 19 in April.

For the Federal Policies component, five of the 21 demographic groups tracked were above 50.0 vs. four in September, one in August, two in July, one in June, four in May and six in April. Nine groups rose in October vs. all 21 in September, five in July, four in June, one in May and 18 in April.

 

 

 

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 about 1,300 adults conducted using a network of online panels. The national poll is generally conducted in the first week of the month.
For more information, go to https://tippinsights.com. To license the IBD/TIPP Poll, please contact Licensing@investors.com.
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