IBD/TIPP Poll Shows That Economic Optimism Continues its Downward Spiral, as All Components Drop in August

The IBD/TIPP Economic Optimism Index, a leading national poll on consumer confidence, today revealed a 2.4% drop from last month’s reading, and its second consecutive month of decline. The August index fell to 40.3, down from 41.3 in July. This was its lowest reading in 12 months (the August 2022 reading was 38.1). The index has now been in negative territory for 24 consecutive 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 1,369 adults August 2-4. 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.

The Presidential Leadership Index saw some bright spots after falling across all components in each of the previous three months. Overall, the August index rose 0.7%, from 41.6 in July to 41.9 this month. The Favorability component was the big mover, climbing 2.4% from 42.3 last month to 43.3 in August. Leadership was the only index component to dip, moving from 39.9 to 39.8 – a 0.3% change.

The National Outlook Index declined for the fourth-straight month, with a reading of 37.9 overall, down 1.6% from July’s 38.5. After experiencing the index’s biggest drop last month, the Standing in the World component increased the most in August, rising 4.1%, from 33.8 to 35.2, while the Morals & Ethics component reached a new low for the Biden administration. This component fell 8.4%, from 29.9 in July to 27.4 in August. This was the lowest reading on the component since September 2020 (25.1).

The Financial-Related Stress Index increased for the second consecutive month in August, moving from July’s reading of 67.1 to this month’s 67.6 – a 0.7% change. On this index, a reading over 50.0 equals more financial stress while a reading below 50.0 indicates consumers feel less stress. The index was last below 50.0 prior to the pandemic in February 2020 (48.1).

“Despite the recent assurances of the Fed that we will not experience a recession, consumers are still worried,” said Ed Carson, IBD's news editor. “Most (84%) believe that wages are not keeping pace with inflation, and the Personal Financial Outlook, which had previously been one of the more positive signals, returned to negative territory for the first time in six months. We clearly still have a way to go to return to pre-pandemic positivity.”

The flagship IBD/TIPP Economic Optimism Index has three key components. In August, all three declined.

• The Six-Month Economic Outlook, a measure of how consumers feel about the economy’s prospects in the next six months, dipped from 35.5 in July to 35.2 in August – a 0.8% change.
• The Personal Financial Outlook, a measure of how Americans feel about their own finances in the next six months, fell 2.6% from its previous neutral reading of 50.0 to 48.7 this month.
• Confidence in Federal Economic Policies, a proprietary IBD/TIPP measure of views on how government economic policies are working, declined the most. Its August reading of 37.1 was down from July’s 38.5 – a 3.6% change.

“Unemployment dropped again, and fears of recession are at their lowest point in a year, but consumers remain unsettled,” said Raghavan Mayur, president of TechnoMetrica, who directed the poll. “People are making economic decisions that reflect a negative change in their standard of living, cutting costs on everything from dining to vacations. With economic optimism dropping again, it will take more than words from the Fed to make Americans feel confident with their short- and long-term financial outlook.”

Economic Optimism Index Breakdown

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, two in June, six in May, 10 in April, eight in March, six in February and three in January. Six groups rose vs. nine groups in the prior two months, zero in May, 13 in April, 12 in March, 13 in February and eight 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, seven in March and April, four in February and zero in January. Optimism over the economy’s six-month outlook rose for nine groups vs. 14 in July, 11 in June, one in May, 11 in March and April, 13 in February and nine in January.

For the Personal Financial component, eight groups IBD/TIPP tracks were in optimistic territory vs. 10 in July, 11 in June, nine in May, 13 in April, 12 in March and 10 in January and February. Eight groups rose for a second straight month vs. one in June, two in May, 14 in April, 16 in March, 15 in February and nine in January.

For the Federal Policies component, one of the 21 demographic groups was above 50.0 vs. two in July, one in June, five in May, nine in April, eight in March, four in February and three in January. Five groups rose vs. 10 in July, eight in June, three in May, 12 in April, 10 in March, 14 in February and 11 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 email [email protected].

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