The IBD/TIPP Economic Optimism Index surged 4.4 points to 58.6 in early May, reaching the highest level since February 2004. Approval of federal economic policies under President Trump hit a 16-year high as the unemployment rate fell to the lowest level since 1969 and the Dow Jones neared a record. Readings above 50 reflect optimism.
Economic Optimism Is Back
The IBD/TIPP Economic Optimism Index backtracked after hitting a 14-year high of 58 in August, having ridden an economic surge courtesy of the Trump tax cuts and federal spending stimulus. The index hit a 16-month low of 50.3 in February. Most of the damage to economic optimism came after the November elections that saw a return of divided government, leading to the government shutdown. The Dow Jones and broader stock market had a brief bear-market scare before Christmas, but have surged back near record territory.
The Fed's abrupt dovish shift in early January and progress toward a China trade deal rescued the Dow before the economy suffered. But now that everything appears to be back on track, there's a new worry.
The IBD/TIPP Poll reflects 900 responses from April 26 to May 5. On the last day of polling, Trump blew up expectations that a China trade deal was a sure thing with a couple of tweets. Trump accused China of trying to renegotiate and said tariffs of 10% on $200 billion in Chinese imports "will go up to 25% on Friday."
Economic Optimism Index Components
The IBD/TIPP Economic Optimism Index is a composite of three major subindexes. They track views of near-term economic prospects, the outlook for personal finances, and views of how well government economic policies are working.
The six-month outlook gauge for the economy vaulted 7 points to 55.8, after falling into pessimistic territory for four of the prior five months. The subindex hit a 13-year high of 57.5 in February 2018 on the heels of tax cuts.
The six-month personal financial outlook index rose 2 points to 64.4. The October reading of 66.7, coming as the Dow Jones hit a record high just below 27,000, was an all-time best for the IBD/TIPP Poll, which dates back to 2001.
Meanwhile, the measure of confidence in federal economic policies jumped 4.1 points to 55.6, highest since April 2003. That topped the 13-year high of 53.7 in November, before the government shutdown.
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