EDITOR NOTE: We’re all familiar with the three standard indicators that economists consider a “goldmine” when making economic predictions: consumer spending, consumer confidence, and consumer sentiment. Well, there’s another similar indicator called the IBD/TIPP Economic Optimism Index that accurately forecasts the three mentioned above. Right now, it’s giving us a negative reading, the lowest since 2016, indicating a strong pessimistic outlook. Equities and metals investors can use this kind of information if only to strategically position themselves for market opportunities that most mainstream investors can’t yet see.
LOS ANGELES -- June 9, 2020 -- The IBD/TIPP Economic Optimism Index, a leading national poll on consumer confidence, declined by 5.4% in June. The index’s reading of 47.0 is at its lowest mark since September 2016. It also places the index in negative territory for the third consecutive month. For the IBD/TIPP indexes, a reading 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. IBD/TIPP surveyed 1,233 adults from May 31 - June 1. Due to COVID-19, the poll was conducted online using TechnoMetrica’s network of online panels to provide the sample.
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 fell 10.5%, going from 49.3 in May to 44.1 in June. All three components of the index declined, with President Trump’s Job Approval rating slipping the most, moving from 50.0 to 42.8 -- a 14.4% drop.
The National Outlook Index also experienced a sharp decline. Its June reading of 42.0 is down 12.1% from last month’s 47.8. All components fell this month, with four of the six components dropping by double digits -- Morals & Ethics is down by 24.4%, Standing in the World by 15.1%, Direction of the Country by 13.4% and Presidential Leadership by 10.5%.
June’s Financial Related Stress Index moved to 63.7 from May’s reading of 64.0 -- a change of 8.3%. The reading keeps the index above 50 for the fourth consecutive month. A reading over 50.0 equals more financial stress while a reading below 50.0 on this index would indicate consumers feel less stress.
“Between the COVID-19 pandemic and escalation of racial tensions amid the death of George Floyd -- as well as President Trump’s response to both -- people across the country are uneasy to say the least,” said Ed Carson, IBD's news editor. “The June indexes point to deep division and suggest growing dissatisfaction with leadership. How much the economy rebounds in the coming months will likely play an important role in whether Trump is re-elected in November.”
The flagship IBD/TIPP Economic Optimism Index has three key components. This month, two of the three declined.
- The Six-Month Economic Outlook, a measure of how consumers feel about the economy’s prospects in the next six months, increased by 0.2% to 42.4 from 42.3. This marks the second consecutive month for the component to rise; it climbed 11.3% last month.
- The Personal Financial Outlook, a measure of how Americans feel about their own finances in the next six months, fell by 5.9% to 49.8 from 52.9. This is the first time the component has been in negative territory since October 2013.
- Confidence in Federal Economic Policies, a proprietary IBD/TIPP measure of views on how government economic policies are working, declined by 9.5% in June, moving from 53.8 to 48.7. This component was last in negative territory in February 2019 just after the government shutdown.
“Despite a better than expected jobs report, another 14% of poll respondents reported losing their jobs while 26% had their hours reduced. Additionally, 18% have missed mortgage or rent payments. Americans remain highly job sensitive as states reopen-- a move that 39% of respondents feel is coming too soon. Despite tremendous stress and division within the context of the here and now, most people believe we will see a return to normalcy within the next year,” said Raghavan Mayur, president of TechnoMetrica, who directed the poll.
This month, four of 21 demographic groups — such as age, income, race and party preference — that IBD/TIPP tracks were at or above 50, in positive territory, on the Economic Optimism Index. That was down from nine in May, six in April, 15 in March, 19 in February and 20 in January. Just two groups rose this month after 17 climbed in May, 17 fell in April and all 21 groups retreated in March. Sixteen rose in February and 11 in January.
On the Six-Month Economic Outlook component, just two of 21 groups that IBD/TIPP tracks scored in optimistic territory, versus three in May, one in April, seven in March, 14 in February and 12 in January. Optimism over the economy’s six-month outlook fell among all three political groups and among both investors and non-investors alike. Optimism among Independents, a key swing vote in upcoming elections, edged up to 38.6 in June from 37.4 in May and 29.9 in April. That’s still down from 42.7 in March and 57.5 in February.
On the Personal Financial component, 10 groups IBD/TIPP tracked were in optimistic territory, down from 13 in May and all 21 in March, February, January, December, November and October. Four groups improved after 15 rose in May, all 21 groups fell in April, 17 in March, 12 in February and four in January.
On the Federal Policies component, eight of the 21 demographic groups tracked were above 50, versus 17 in May and 19 in April when Congress and President Trump agreed on a $2 trillion rescue package and the Federal Reserve embarked on massive monetary stimulus. This month, no groups rose after six did in May, 17 in April and just one in March.
Originally posted on Tipponline