The IBD/TIPP Economic Optimism Index, a leading national poll on consumer confidence, dropped for the third consecutive month. The September index fell 9.5%, moving from 53.6 in August to 48.5 this month. This downtrend returns the index to negative territory after eight consecutive months of positivity. For the IBD/TIPP indexes, a reading above 50.0 signals optimism and below 50.0 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.
For the September index, IBD/TIPP surveyed 1,305 adults from September 1-3. The poll was conducted online using TechnoMetrica’s network of online 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.
The Presidential Leadership Index took an even bigger hit than the Economic Optimism Index in September, falling 15.8% overall. President Biden’s approval rating is now in negative territory for the first time (49.8, down from 58.7 last month). Additionally, each component of the index dropped by double digits, with Favorability declining the most at 17.3%.
The National Outlook Index also fell sharply, down 12.4% overall in September. The index moved from 53.1 in August to 46.5 this month. Each index component declined in September as well, with four of six components dropping by double digits. The Standing in the World component fell the most at 16.1%, moving from 50.9 last month to 42.7 this month, while Quality of Life was the only index component to remain in positive territory (54.1, down 7.8% from 58.7 in August).
The Financial Related Stress Index rose again for the fifth consecutive month, going from 63.2 in August to 64.9 in September– a 2.1% increase in stress. A reading over 50.0 equals more financial stress while a reading below 50.0 on this index would indicate consumers feel less stress. This index was last below 50.0 in February 2020 (48.1).
“September opened with Americans coping with a slew of difficult issues between the removal of troops and rapid evacuation from Afghanistan, the Delta variant-driven COVID-19 surge, the moratorium on evictions coming to a close and jobless aid ending. It is not surprising that sentiment is trending negative,” said Ed Carson, IBD’s news editor. “The good news is that inflation could be peaking soon, which might relieve worries about some of the long-term impacts of the present moment. It is also noteworthy that while economic optimism tumbled, fewer people see it as a top issue.”
The flagship IBD/TIPP Economic Optimism Index has three key components. This month, all three declined.
- The Six-Month Economic Outlook, a measure of how consumers feel about the economy’s prospects in the next six months, fell 17.7%, moving from 50.2 in August to 41.3 in September, its lowest reading since August 2020.
- The Personal Financial Outlook, a measure of how Americans feel about their own finances in the next six months, is the only index component that remained in positive territory, although it moved from 57.8 last month to 55.0 this month– a decline of 4.8%.
- Confidence in Federal Economic Policies, a proprietary IBD/TIPP measure of views on how government economic policies are working, was down 7.2%. It moved from 52.9 in August to 49.1 in September.
“This month, financial stress is the highest we’ve seen in nine months, and we’re staring down a weaker than expected jobs report. On top of this, a flurry of post-mortgage forbearance foreclosures is likely to cool the real estate market; rents could escalate, putting families in even more of a pinch,” said Raghavan Mayur, president of TechnoMetrica, who directed the poll. “With the Fed meeting September 21-22, investors may be bracing for a potential stock market correction in early October, when reality sinks in about the flurry of worrisome September data. At this pivotal junction, it begs the question of whether the pandemic will finally touch the ‘haves’ this fall who have been relatively insulated from COVID-19’s financial impact thus far.”
Economic Optimism Index Breakdown
This month, eight 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. 14 in August and July. Eighteen were positive in June, 17 in May and April, 16 in March, 11 in February and eight in January. Just one group rose this month vs. one in August, six in July, 15 in June, seven in May, 14 in April, 19 in March, 13 in February and 12 in January.
For the Six-Month Economic Outlook component, five of 21 groups that IBD/TIPP tracks scored in optimistic territory vs. eight in August, nine in July, 17 in June, 13 in May, 15 in April, 12 in March, nine in February and seven in January. Optimism over the economy’s six-month outlook rose in not a single group vs. 10 in August, just one in July, 15 in June, nine in May, 15 in April, 18 in March, 15 in February and 14 in January.
For the Personal Financial component, 16 groups IBD/TIPP tracks were in optimistic territory vs. 19 in August and July, 18 in June, 13 in May, 19 in April, 17 in March and February and 19 in January. Just three groups rose for a second straight month vs. 15 in July, 10 in June, nine in May and April, 15 in March, 10 in February and 12 in January.
For the Federal Policies component, nine of the 21 demographic groups tracked were above 50.0 vs. 10 in August, 12 in July, 17 in June, 13 in May, 16 in April, 14 in March, nine in February and seven in January. Just two groups rose vs. 12 in August, three in July, 18 in June, four in May, 12 in April, 20 in March, 16 in February and 13 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.
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