Attitudes On Economy Take A Turn For Better In The Week That Was
By Investor's Business Daily Staff
Wednesday November 13, 10:46 am ET
biz.yahoo.com
Americans' faith in the economy has improved slightly after the midterm election, and the outlook for the next six months has turned positive again after a downbeat October.
These are the main findings of the latest IBD/TIPP Poll, which ended Monday and surveyed Americans throughout an eventful week that included not only the election, but also a big interest-rate cut by the Federal Reserve.
The IBD/TIPP Economic Optimism Index ticked up 1 point to 54.4 in November after slipping the month before to its lowest mark since September 2001. The index is still 8.5 points off its March 2002 high. A score above 50 shows optimism, below 50 pessimism and 50 is neutral.
"The improvement, though modest, is a welcome change and could potentially gain much-needed traction," concluded Raghavan Mayur, president of TIPP, a unit of TechnoMetrica Market Intelligence, IBD's polling partner.
"At present, it's fair to describe U.S. consumer confidence as stronger than in October, with 13 of the 21 key groups improving."
The best gains were in the East, where earlier concerns over the snipers may have had an outsized impact. Other gainers were Republicans, women, 18- to 24-year-olds and investors.
Declines were notable among Democrats, blacks and Hispanics.
Cut The Suspense
"The conclusion of (the) elections cut the suspense factor out," said Mayur. "Americans now have better visibility of what they may expect from Washington.
"They hope for less gridlock and more economic initiatives. The job situation is clearly the most worrisome variable. Americans expect Washington to roll out initiatives for job creation."
The Fed rate cut "helped improve a weakened consumer psyche," said Mayur. "But a lot is going to depend on stock market performance. Typically any divergences between the market and consumers are quickly corrected."
The market bottomed and rallied in October, with the Nasdaq adding 13.5%, the Dow industrials 10.6% and the S&P 500 8.6%. Consumer sentiment is catching up.
Consumer Factor
Consumer spending accounts for two-thirds of U.S. economic activity, and a high level of consumer confidence is essential to keep the recovery on track.
All three components of the optimism index gained in November.
Most of the improvement was due to the component that measures how consumers feel about the economy's prospects six months from now. After slicing through the neutral level of 50, to 48.3 in October from 50.5 in September, it recovered back to 50.4.
"The improvement in the outlook component lowers the risk of the economy falling into a second recession," according to Mayur.
Of the other two components, one that gauges how Americans feel about their personal finances improved to 58.9 in November from 58.3 in October. The component measuring how government economic policies are working edged up to 54.0 from 53.6.
Investors' attitudes took a turn up, with their optimism index rising by 2.1 points to 54.8 from 52.7. Republicans rallied from a score of 63.2 to 68.5. Democrats dropped from 46.9 to 43.9.
Optimism among respondents in the East jumped to 57.9 from 51.3 while other regions were little changed. "The sniper attacks took a toll in October, nearly paralyzing the economy in the Washington area," Mayur said. "Catching the snipers ended that paralysis."
The six-month economic outlook now is much stronger than it was a year ago (50.4 vs. 47.4 in November 2001), and the personal financial component is a tad higher (58.9 vs. 58.1). |
