Economic Optimism Rebounds

Wed, 02 June 2021  |  consumers economy 

The IBD/TIPP Economic Optimism Index, a leading national poll on consumer confidence, rebounded in June after a dip in May. Last month’s index showed a 3.5% decline, while this month the index is back up 3.7%. June’s reading of 56.4 keeps the index in positive territory for the sixth consecutive month and ties April’s reading for its highest mark since February 2020 (59.8), prior to the pandemic slump. 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 June index, IBD/TIPP surveyed 1,305 adults from May 26 to May 28. 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 bounced back after two months of decline. It rose 3.9% to 61.2 in June. Additionally, each of the index components remained in positive territory for the fifth consecutive month. The Leadership component rose the most at 6.0% (58.3) while Favorability climbed 4.0% to 62.7, its highest reading since President Biden’s first month in office.

Notably, the National Outlook Index hit its highest mark since January 2004, with a reading of 55.2 in June. Ticking upward by 4.3%, the index fully erased May’s 3.8% slide. All six index components registered increases this month. Standing in the World in particular shot up 7.1% (54.4), reversing last month’s 6.8% drop.

The Financial Related Stress index was the only index to continue trending negative. The index rose by 2.3%, from 57.7 to 59.0. 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).

“June’s indexes reflect a great deal of positivity as states reopen,” said Ed Carson, IBD's news editor. “Our data shows that nearly one half of Americans are vaccinated, with another 17% having received their first shot. This creates more possibilities for both work and travel, as more money is pumped into the economy.”

The flagship IBD/TIPP Economic Optimism Index has three key components. This month, all three increased.

  • The Six-Month Economic Outlook, a measure of how consumers feel about the economy’s prospects in the next six months, rose by 4.5%, moving from 53.2 in May to 55.6 in June.
  • The Personal Financial Outlook, a measure of how Americans feel about their own finances in the next six months, rose by 0.5%, moving from 57.0 last month to 57.3 this month.
  • Confidence in Federal Economic Policies, a proprietary IBD/TIPP measure of views on how government economic policies are working, rose the most, climbing 6.2% from 53.1 in May to 56.4 in June. This is the highest reading for this component since the start of the pandemic.

"June’s indexes show a lot of good news, but Americans remain a little wary in terms of their personal situation, with 54% of respondents falling into the ‘job sensitive’ category," said Raghavan Mayur, president of TechnoMetrica, who directed the poll. "Yet despite inflationary concerns, 44% of people believe the economy is improving, and the six-month economic outlook is nearing pre-pandemic levels. The job market also looks promising, with more and more businesses returning and/or opening to full capacity. As such, Americans can hopefully begin to feel greater stability after an extremely turbulent year."

Economic Optimism Index Breakdown

This month, 18 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 up from 17 in May and April, 16 in March, 11 in February, eight in January and nine in December. Fifteen groups rose this month vs. seven in May, 14 in April, 19 in March, 13 in February, 12 in January and nine in December.

For the Six-Month Economic Outlook component, 17 of 21 groups that IBD/TIPP tracks scored in optimistic territory vs. 13 in May, 15 in April, 12 in March, nine in February and seven in January and December. Optimism over the economy’s six-month outlook rose among 15 groups vs. nine in May, 15 in April, 18 in March, 15 in February, 14 in January and 10 in December.

For the Personal Financial component, 18 groups IBD/TIPP tracks were in optimistic territory vs. 13 in May, 19 in April, 17 in March and February, 19 in January and December and 18 in November. Ten groups rose vs. nine in May and April, 15 in March, 10 in February, 12 in January and 13 in December.

For the Federal Policies component, 17 of the 21 demographic groups tracked were above 50.0, vs. 13 in May, 16 in April, 14 in March, nine in February, seven in January and five in December. Eighteen groups rose vs. four in May, 12 in April, 20 in March, 16 in February and 13 in January.

Source: IBD

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