Economic Outlook

Tracking The U.S. Economy

Consumer confidence in federal policies drives down economic optimism overall

According to a new IBD/TIPP Poll 62% of Americans now believe we are in a recession, up four points over the last month.

LOS ANGELES–(BUSINESS WIRE)–The IBD/TIPP Economic Optimism Index, a leading national poll on consumer confidence, declined by 1.0% overall in August to return to a reading of 38.1 due to a significant drop on the Federal Policies component. The index now has been in negative territory for the last 12 months. A reading above 50.0 signals optimism and below 50.0 indicates pessimism on IBD/TIPP indexes.

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.

For the August index, IBD/TIPP surveyed 1,335 adults from August 2 to August 4. 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.

After experiencing a nice bump up (+ 4.2%) in July, the Presidential Leadership Index declined by 7.0% in August to hit a new low for the Biden presidency. Its overall reading now stands at 41.4, down from 44.5 last month. Every component fell this month, with Favorability dropping the most at 9.0%.

The National Outlook Index declined for the fourth consecutive month in August. Its overall reading now sits at 37.4, down 3.1% from July’s 38.6. This represents its lowest mark in more than a decade; the last time it was this low was August 2011 (35.5). Every index component except for Quality of Life slipped, with Quality of Life rising 2.0%, moving from 44.4 in July to 45.3 in August. All components remain in negative territory.

Financial Related Stress inched down another 1.2% in August to 68.5 from 69.3. A reading over 50.0 on this index equals more financial stress while a reading below 50.0 would indicate consumers feel less stress. The index was last below 50.0 in February 2020 (48.1).

“Although the numbers look bleak across several components, there are some potential spots for optimism in the August indexes,” said Ed Carson, IBD’s news editor. “Consumers appear to be feeling a little better about their personal financial situation over the short and long term, however modestly. But we are still on shaky ground, with 62% of Americans believing we’ve entered a recession.”

The flagship IBD/TIPP Economic Optimism Index has three key components. In August, two increased and one declined.

  • The Six-Month Economic Outlook, a measure of how consumers feel about the economy’s prospects in the next six months, rose 1.2% this month. Its reading of 32.6 is up from July’s mark of 32.2.
  • The Personal Financial Outlook, a measure of how Americans feel about their own finances in the next six months, climbed 2.6% in August, moving from 45.3 in July to 46.5 this month. This is the highest reading of the three components that comprise this index, yet it remains in negative territory for the third consecutive month.
  • Confidence in Federal Economic Policies, a proprietary IBD/TIPP measure of views on how government economic policies are working, experienced a substantial drop in August. The index fell from 38.0 to 35.3 – a decline of 7.1%. This now represents the component’s lowest reading since January 2014 (35.1).

“With more Americans believing we’re in a recession than in months past, federal policies are the thorn in their sides,” said Raghavan Mayur, president of TechnoMetrica, who directed the poll. “The economy is a top issue for 56% of people, and inflation continues to be troublesome to the majority of Americans, even as individuals are seemingly starting to feel more positive about their own respective financial situations and prospects. If Democrats want to maintain control of Congress, they’re going to have to communicate strong, responsible fiscal leadership in the face of unpopular economic policies.”

Economic Optimism Index Breakdown

The economy is a top issue for 56% of people, and inflation continues to be troublesome to the majority of Americans, even as individuals are seemingly starting to feel more positive about their own respective financial situations and prospects....

This month, just one 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 vs. three in July, one in June, four in May, seven in April, three in both March and February and five in January. Eleven groups rose in August vs. 10 in July, three in June, one in May, 20 in April, three in March, eight in February and three in January.

For the Six-Month Economic Outlook component, none of the 21 groups that IBD/TIPP tracks scored in optimistic territory for a third straight month. That’s vs. one in May, three in April and one in March, February and January. Optimism over the economy’s six-month outlook rose for 10 groups in August vs. 16 in July, five in June, zero in May, 20 in April, one in March, 11 in February and four in January.

For the Personal Financial component, seven groups IBD/TIPP tracks were in optimistic territory vs. seven in July, six in June, nine in May, 14 in April, six in March, 14 in February and 15 in January. Eleven groups rose after nine did in July, two in June, six in May, 19 in April, two in March, none in February and six in January.

For the Federal Policies component, one of the 21 demographic groups tracked were above 50.0 vs. two in July, one in June, four in May, six in April, three in March and February and two in January. Five groups rose in August vs. five in July, four in June, one in May, 18 in April, 10 in March, four in February and five in January.

 

 

 

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 IBDlicensing@investors.com.
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