Sentiment Snaps Out Of Doldrums On Wave Of Strong Economic Data
BY IBD STAFF
Americans' faith in the economy has perked up after spending three of the last four months in a spring and summer funk, new IBD/TIPP Poll data show.
The IBD/TIPP Economic Optimism Index gained 2.3 points, or 4.7%, reaching 50.9 in August and lifting it back into positive territory. Over 50 means optimism; below 50 indicates pessimism.
The index has a good track record of foreshadowing the confidence indicators put out later each month by the University of Michigan and The Conference Board. IBD/TIPP conducted the national poll of 905 adults August 1 to August 5. The margin of error is +/- 3.3 percentage points.
All three of the index's key components posted gains:
Click to view image • The Six-Month Economic Outlook, a measure of how consumers feel about the economy's prospects in the next six months, climbed 4.7 points, or 11.6%. But at 45.3, it remains in negative territory, where it's been for six months — the second longest stretch below 50.0 since the 10-month slump that began in February 2001 and ended in November of that year.
• The Personal Financial Outlook, a measure of how Americans feel about their own finances in the next six months, gained 1.2 points, or 2.1%, reaching 57.7, rebounding off July's low.
• Confidence in Federal Economic Policies, a proprietary IBD/TIPP measure of views on how government economic policies are working, picked up 1.1 points, or 2.3%, reaching 49.6. This represents the highest reading for this component in five months of tracking.
"We're seeing confidence in the economy improving among just about all Americans," said Raghavan Mayur, president of TIPP, a unit of TechnoMetrica Market Intelligence, IBD's polling partner. He credits a string of good news showing an economy gaining momentum.
"Job growth has been strong, with more than 200,000 new jobs added in July alone. Beyond that, factory orders are up, average weekly wages are up, interest rates are still low and the Fed has done its part to keep inflation at bay."
"Consumer confidence has clearly turned up," added Terry Jones, associate editor at Investor's Business Daily. "Despite the spurt in oil prices above $60 a barrel, more people believe their own personal financial situation will improve over the next six months. This is significant, and potentially a very good sign for the economy."
Nineteen of the 21 demographic groups that IBD/TIPP tracks improved on the Economic Optimism Index in August. Twelve are optimistic compared with seven in July, 12 in June and three in May.
The biggest increases were seen among Northeasterners (+8.6 points), those over the age of 65 (+7.8), blacks and Hispanics (+6.5), households earning less than $30,000 a year (+6.2) and Democrats (+5.1).
Investors gained 3.1 points, or 6.3%, reaching 52.5, after a 3.2-point slip to 49.4 in July.
Despite its improvement, the Economic Outlook component continues in negative territory for most. In August, just three groups — those aged 65+, households earning $75,000+ and Republicans — registered in positive territory on this component.
On the Personal Financial component, 20 of the 21 groups are in positive territory, with eight declining and 13 displaying more confidence in their personal financial future in August than in July.
On the Federal Policies component, nine groups were below 50 in August compared to 13 in July, 11 in June and 19 in May. Fifteen groups were more optimistic about the government's economic policies in August than in July, while six were less optimistic.
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