The IBD/TIPP Economic Optimism Index, a leading national poll on consumer confidence, ended its streak of four consecutive months with improved optimism. The May index showed a 3.5% decline, with a dip in all three of its components. The index overall remained in positive territory, however, with a reading of 54.4, down from 56.4 in April. For the IBD/TIPP indexes, a reading above 50.0 signals optimism and below 50.0 indicates pessimism. The Economic Optimism Index has been in positive territory since January 2021.
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 May index, IBD/TIPP surveyed 1,300 adults from April 28 to April 30. 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.
This month, the Presidential Leadership Index declined again, falling another 2.2%, after last month’s 2.4% slide and March’s 2.2% dip. President Biden’s current 58.9 reading remains higher than any month of the Trump presidency, however. In addition, all of the index components stayed in positive territory for the fourth consecutive month.
The National Outlook Index was down 3.8% in May, moving from April’s 55.0 to 52.9 this month. All six components reflected declines, with the Standing in the World component falling the most at 6.8%. Nevertheless, every component except Morals & Ethics (42.8) remained in positive territory (Morals & Ethics was last in positive territory in April 2003).
The Financial Related Stress index also ticked back up. The index rose by 1.6%, from 56.8 to 57.7. 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).
“Even with another month’s worth of vaccinations and more facets of the economy opening up, consumers remain a bit wary,” said Ed Carson, IBD’s news editor. “The respective indexes continue to perform well overall, but slight declines across the board indicate that we have not yet settled into a new normal.”
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 by 4.8%, moving from 55.9 in April to 53.2 in May.
- The Personal Financial Outlook, a measure of how Americans feel about their own finances in the next six months, dipped by 0.5%, moving from 57.3 last month to 57.0 this month.
- Confidence in Federal Economic Policies, a proprietary IBD/TIPP measure of views on how government economic policies are working, declined the most, dropping 5.2% from 56.0 in April to 53.1 in May.
“Despite this month’s indexes edging down slightly, the number of people who believe we are in a recession dropped 7% over the last month to hit the lowest level since early in the pandemic. Most people are now more comfortable regularly working on-site at their places of employment, which signals that we are approaching a broader reopening of the economy,” said Raghavan Mayur, president of TechnoMetrica, who directed the poll. “Additionally, Americans are using their stimulus checks to ensure their future financial security, with a combined 65% using checks to pay down credit cards, grow or replenish their savings or invest in the stock market. These factors suggest that as the economy continues to improve, people will once again feel assured of their financial footing and long-term prospects.”
Economic Optimism Index Breakdown
This month, 17 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 unchanged vs. April and up from 16 in March, 11 in February, eight in January, nine in December and eight in November. Seven groups rose this month vs. 14 in April, 19 in March, 13 in February, 12 in January, nine in December and just three in November.
For the Six-Month Economic Outlook component, 13 of 21 groups that IBD/TIPP tracks scored in optimistic territory vs. 15 in April, 12 in March, nine in February, seven in January and December and eight in November. Optimism over the economy’s six-month outlook rose among nine groups, vs. 15 in April, 18 in March, 15 in February, 14 in January, 10 in December and four in November.
For the Personal Financial component, 13 groups IBD/TIPP tracks were in optimistic territory vs. 19 in April, 17 in March and February, 19 in January and December and 18 in November. Nine groups rose in May and April vs. 15 in March, 10 in February, 12 in January, 13 in December and three in November.
For the Federal Policies component, 13 of the 21 demographic groups tracked were above 50.0, vs. 16 in April, 14 in March, nine in February, seven in January and five in December and November. Four groups rose vs. 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 1,200 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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