The IBD/TIPP Economic Optimism Index gained 0.7 points, or 1.6% in September, posting a reading of 45.2 vs. 44.5 in August.  The index is 0.6 points above its 12-month average of 44.6, 0.8 points above its reading of 44.4 in December 2007 when the economy entered the recession, and 4.0 points below its all-time average of 49.2.

 Note: Index readings above 50 indicate optimism; below 50 indicate pessimism.

The IBD/TIPP Economic Optimism Index has a good track record of foreshadowing the confidence indicators put out later each month by the University of Michigan and The Conference Board.  IBD/TIPP conducted the national poll of 867 adults from August 23 to August 28. The margin of error is +/-3.4 percentage points.

The IBD/TIPP Economic Optimism Index has three key components.  This month, all of the three components improved.

    • The Six-Month Economic Outlook, a measure of how consumers feel about the economy’s prospects in the next six months, improved 1.0 point, or 2.4%, to 42.8.  The sub-index was 32.1 when the economy entered the last recession in December 2007.

    • The Personal Financial Outlook, a measure of how Americans feel about their own finances in the next six months, gained 0.2 points, or 0.4%, to 54.5.

    • Confidence in Federal Economic Policies, a proprietary IBD/TIPP measure of views on how government economic policies are working, rose 0.8 points, or 2.1%, to 38.3.

“For the twenty-third month in a row, consumer confidence continues to be in the pessimistic territory. 52% believe that the economy is not improving and 47% still think that we are in a recession.  Further, 21% of households say at least one member is looking for a full-time job,” said Raghavan Mayur, president of TIPP, a unit of TechnoMetrica Market Intelligence, IBD's polling partner.

 “The continued pessimistic tone to economic optimism remains a headwind for the economy,” said Terry Jones, associate editor of Investor’s Business Daily. “Americans seem to be waiting for a bigger response from the economy, but so far it hasn’t come. It remains to be seen how this will play out in the mid-term elections.”

The Breakdown

This month, two of the 21 demographic groups that IBD/TIPP tracks were above 50 on the Economic Optimism Index. Fifteen groups improved and six declined.
 
On the Economic Outlook component, two of the 21 groups that IBD/TIPP tracks scored in optimistic territory.  Fifteen groups improved and six declined.
 
On the Personal Financial component, nineteen of the 21 groups IBD/TIPP tracks scored in optimistic territory. Twelve groups increased and nine decreased.  
 
On the Federal Policies component, two of the 21 demographic groups tracked were above 50.  Eleven groups advanced on the component and ten declined.