Tue, 12 January 2021 | consumer confidence
A leading national poll on consumer confidence conducted by Investors Business Daily found consumer confidence moving back into positive territory in early January. After a neutral November (50.0) and a month in pessimistic territory in December (49.0), January’s reading of 50.1 shows an increase of 2.2% over last month’s reading. 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.
In addition to the Economic Optimism Index, IBD/TIPP 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 across all measures for the second straight month, moving from 45.8 in December to 44.5 in January -- a 2.8% dip. The Job Approval component fell the most (4.2%), moving from 45.4 to 43.5.
The National Outlook Index also dropped this month after a slight increase in December. This month’s reading of 43.1 was down 5.5% from last month’s 45.6. Notably, the Direction of the Country component plummeted 17.4% to 31.9 while the Morals and Ethics component declined 10.0% to 28.7.
Financial stress improved again in January, although the index remains high. This month stress declined 2.6%, moving from 65.4 last month to 63.7. 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 has been above 50.0 since March.
“As the outcome of the election was settled, it was encouraging to see positive momentum around the economy,” said Ed Carson, IBD’s news editor. “And yet, Americans have been stunned by the events that have unfolded over the last week. In addition to the siege of the Capitol, the latest jobs report was not as positive as anticipated. Now, as we sit at the brink of a second impeachment of President Trump and the inauguration of Joe Biden, the climate is uncertain at best. Next month’s indexes will shed more light on how Americans are feeling about the economy, their prospects and the ability to move forward.”
The flagship IBD/TIPP Economic Optimism Index has three key components. This month, all three increased.
“January’s Economic Optimism Index is interesting from the standpoint that only 28% of Americans believe the economy is improving and 45% think we are in a recession. The job situation also looks grim, with at least one person looking for a full-time job in 43% of households and another 40% concerned about job loss in the home,” said Raghavan Mayur, president of TechnoMetrica, who directed the poll. “These numbers would traditionally skew towards negativity, and yet we saw a slight rebound on the index. This is likely due, in part, to the COVID relief payments passed last month and the possibility of a $2,000 stimulus payment coming from the new administration. So, while the nation continues to struggle through the COVID crisis, there is hope that things will improve in the near future.”
Economic Optimism Index Breakdown
This month, eight of 21 demographic groups — such as age, income, race and party preference — that IBD/TIPP tracks are above 50.0, in positive territory, on the Economic Optimism Index. That’s vs. nine in December, eight in November, 15 in October, three in September, four in August and two in July. Twelve groups rose this month and one was unchanged. In December, nine groups rose vs. just three in November, all 21 in October, seven in September, 17 in August and two in July.
For the Six-Month Economic Outlook component, 14 of 21 groups that IBD/TIPP tracks scored in optimistic territory vs. seven in December, eight in November, 13 in October and just one in the prior three months. Optimism over the economy’s six-month outlook rose among 14 groups vs. 10 in December, four in November and all 21 in October.
For the Personal Financial component, 19 groups IBD/TIPP tracked were in optimistic territory, the same as in December. That’s vs. 18 in November, 20 in October, 13 in September, 15 in August and 11 in July. Twelve groups improved and one was unchanged. In December, 13 groups rose vs. just three groups in November, 19 in October, five in September, 15 in August and 12 in July.
For the Federal Policies component, seven of the 21 demographic groups tracked were above 50.0, up from five in December and November. In October, 10 groups were above 50.0 vs. two in September, eight in August and one in July. Thirteen groups rose this month.
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.
Source: Investors Business Daily