The Pulse

While Economic Optimism Remains, It Continues to Decline

Financial stress reaches highest level since government shutdown

September Investor’s Business Daily poll shows that  six-month financial outlook drops by 14%

September 04, 2019 — LOS ANGELES–(BUSINESS WIRE)–The IBD/TIPP Economic Optimism Index, a leading national poll on consumer confidence, dropped by 7.8% to 50.8 in September. This marks the second consecutive month optimism has declined. The index remains above 50.0 overall however, pushing its record run in positive territory to 36 consecutive months. An index reading below 50.0 for the IBD/TIPP indexes indicates pessimism.

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 903 adults from August 22 to August 30, 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.

Presidential Job Approval Rating Stalls

This month the Presidential Leadership Index ticked upwards after last month’s 9.5% drop. Its September reading of 43.4 increased 1.6% from August. President Trump’s Job Approval was the index’s only component to decline. After falling 10.7% in August, it showed minimal movement, shifting from 41.8 to 41.6 in September.

Concurrently, the National Outlook Index declined for the second consecutive month. This index dropped another 3.1% in September after falling 5.4% in August. The latest index reading is 44.2. The Financial Related Stress Index increased by 8.3%, which also marks the second straight month of increased stress. September’s reading of 53.3 shows a return to above average financial stress. A reading below 50 on this index indicates that consumers feel less financial stress while a reading above 50 equals more financial stress.

“With ongoing rumblings about a possible global recession coupled with anxiety about the trade war with China, Americans are getting a bit nervous about their financial prospects,” said Terry Jones, IBD’s commentary editor. “While optimism remains, consumers no longer believe the economy is improving. We may see this fear increase as another round of tariffs are put into motion.”

Three Leading Indicators Decline

The flagship IBD/TIPP Economic Optimism Index has three key components. This month, all three components decreased.

The Six-Month Economic Outlook, a measure of how consumers feel about the economy’s prospects in the next six months, moved into negative territory. After a 14% drop from August, its new reading of 43.0 is the lowest in three years, but it remains 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, dropped by 5.4%, from 62.6 in August to 59.2 in September.

Confidence in Federal Economic Policies, a proprietary IBD/TIPP measure of views on how government economic policies are working, fell 4.4% for the second month in a row, moving from 52.6 last month to 50.3 this month.

“Persistent media coverage of a potential recession, based on the inverted bond yields and recent developments in the ongoing trade war with China, may be weighing down American’s economic confidence, and could explain the 14% drop in the economic outlook index,” said Raghavan Mayur, president of TechnoMetrica who directed the poll. “In addition, the stock market is currently under pressure and is experiencing a high degree of volatility. Resolving the China trade war, along with an accommodating Fed monetary policy, will go a long way in boosting confidence,” added Mayur.

The Breakdown

With ongoing rumblings about a possible global recession coupled with anxiety about the trade war with China, Americans are getting a bit nervous about their financial prospects...

This month, 14 of 21 demographic groups — such as age, income, race and party preference — that IBD/TIPP tracks were at or above 50 on the Economic Optimism Index. That is down from 16 in August and 19 in July. Just three groups rose during the month, after five rose in August and all of them rose in July. In June, there was an across-the-board decline. In May, all rose.

On the Economic Outlook component, just three of the 21 groups that IBD/TIPP tracks scored in optimistic territory, versus 11 in August, 13 in July and four in June. In May, 18 were in the optimistic zone.

On the Personal Financial component, 19 of 21 groups IBD/TIPP tracks remained in optimistic territory. That’s down two from August. Just three groups rose in September, down from seven in August. Eighteen groups fell, more than the 14 in August fell. In July, 17 rose and just four fell. In June, just three groups rose while 18 declined. The index stood at 59.2 in September, down from 62.6 in August, 63.1 in July, and 61.1 in June. It’s below May’s 64.4, and the all-time high of 66.7 in October.

On the Federal Policies component, 11 of the 21 demographic groups tracked were above 50, down from 12 in August, 16 in July and 12 in June. In May, 17 were above 50. This month, six groups rose, up from just four in August but down sharply from 19 in July. All of them fell in June. In May, 18 groups rose and three fell.

 

 

 

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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