The Pulse

In the Midst of the Government Shutdown, Economic Optimism Dips Slightly

Presidential Leadership Index increases despite partisan rancor

January 15, 2019 — LOS ANGELES–(BUSINESS WIRE)–The IBD/TIPP Economic Optimism Index, a leading national poll on consumer confidence, dipped by just 0.6 percent in January as the U.S. government continues the longest shutdown on record.

Although the overall reading of 52.3 hit its lowest mark since December 2017 and reflected a third consecutive month trending downward, the index continues a record run in positive territory. The Economic Optimism Index has now spent 28 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 903 adults from January 3 to January 12, 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. The Presidential Leadership Index regained some ground from last month’s decrease, rising 3.0 percent to 44.0 from 42.7.

National Outlook Down

By contrast, the National Outlook Index decreased, dipping from 44.8 last month to 44.4 in January. Notably, the Morals & Ethics component of the index rebounded from its December drop, climbing 7.5 percent, from 26.7 to 28.7. At the same time, the Direction of the Country category slipped by 9.7 percent to a reading of 40.0. Concurrently, the Financial Related Stress Index declined by 1.1 percent, moving from 52.4 to 51.8. A reading below 50 on this index indicates that consumers feel less financial stress while a reading above 50 equals more financial stress.

“Despite the government shutdown, Trump’s numbers are up and consumers tend to feel cautiously optimistic about their own finances, even as confidence in federal policies falters and concern about gridlock in Washington increases,” said Terry Jones, IBD’s Commentary Editor. “As federal workers begin missing paychecks and the shutdown drags on, we may see a more dramatic shift in sentiment coming if Americans feel the effects of the shutdown and current trade policies.”

Three Key Compnents

The flagship IBD/TIPP Economic Optimism Index has three key components. This month, two increased while one decreased.

  • The Six-Month Economic Outlook, a measure of how consumers feel about the economy’s prospects in the next six months, increased 0.9 percent. Despite the modest rise, the component remains in negative territory for the second consecutive month with a reading of 46.8, up from 46.4 in December. This is still 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, rose by 0.3 percent to a reading of 61.0. The reading keeps this component above its long-term average of 57.3.
  • Confidence in Federal Economic Policies, a proprietary IBD/TIPP measure of views on how government economic policies are working, fell by 3.2 percent and returned to negative territory with a reading of 49.0, down from December’s reading of 50.6. This is the second month in a row that this component experienced a decline.
Despite the shutdown, Trump’s numbers are up and consumers tend to feel cautiously optimistic about their own finances, even as confidence in federal policies falters and concern about gridlock increases...

“Despite the recent stock market correction, Americans’ economic confidence continues to remain in positive territory. The U.S. is benefitting from a strong job market, higher wages, and low gasoline prices. In addition, many Americans are still reaping the benefits of tax cuts. On the negative side, the risk factors on the horizon are trade uncertainties, the political gridlock, higher interest rates, the special counsel investigation, and potential turbulence in the stock market,” noted Raghavan Mayur, president of TechnoMetrica, IBD’s polling partner.

The Breakdown

This month, 15 of 21 demographic groups — such as age, income, race, and party preference — that IBD/TIPP tracks were above 50 on the Economic Optimism Index. Eight groups rose during the month, up sharply from just one in December and six in November. Thirteen groups fell during the month while one stayed the same.

On the Economic Outlook component, just six of the 21 groups that IBD/TIPP tracks scored in optimistic territory, up from just three in December but down from 13 in November.

On the Personal Financial component, 20 of 21 groups IBD/TIPP tracks remained in optimistic territory, as 12 groups rose and the rest declined. Only Democrats were in pessimistic territory, declining from 52.2 in December to 46.6 in January, as the government shutdown began. The overall index of 61.0 in January was up from 60.8 in December but slightly below the 62.3 in November. The index hit an all-time high of 66.7 in October.

On the Federal Policies component, seven of the 21 demographic groups tracked were above 50, down from 11 in December and 14 in November. Just six groups rose, while 15 fell. In December, three groups rose while 18 fell.




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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