The U.S. economic outlook just suffered its biggest one-month drop since October 2013 amid the coronavirus emergency, the March IBD/TIPP Poll finds. Still, the damage to consumer confidence has been limited. The IBD/TIPP Economic Optimism Index remained in moderately optimistic territory. Americans remained strongly positive about their own financial outlook, despite the Dow Jones sell-off that took hold last week.
The big fall in near-term expectations for the U.S. economy reflected a sharp change — things suddenly went from looking great to not so good — rather than deep gloom. The six-month economic outlook index fell to a modestly pessimistic 47.8 from a strongly optimistic 57. Readings above the neutral 50 level reflect optimism.
The overall Economic Optimism Index fell to 53.9 — just a four-month low. Yet that was still a big comedown from the 16-year high 59.8 at the end of January.
Confidence In U.S. Economy, Like Dow Jones, May Stay Volatile
The Dow Jones Industrial Average hit a record high on Feb. 12. The S&P 500 and Nasdaq composite hit records on Feb. 19. A stock market correction kicked in so quickly that the confidence impact may not have fully registered.
The IBD/TIPP Poll reflects responses from 908 adults contacted via mobile phones and landlines from Feb. 20-29. The Dow Jones decline didn't really pick up steam until Feb. 24. The blue chip index tumbled more than 1,000 points that day as the CDC warned that the spread of the coronavirus would eventually pick up in the U.S. On the other hand, the poll doesn't reflect Monday's 1,297-point Dow Jones rebound.
So far the U.S. economy has seen a modest impact from the coronavirus, as tourism suffers and manufacturers deal with snags in their global supply chains. "Coronavirus is wreaking havoc on the electronics industry," according to one response for the Institute for Supply Management's manufacturing survey index. The ISM for February came in at 50.1, still barely in expansion territory, though down from January's 50.9 reading. The new orders index turned slightly negative, falling to 49.8 from 52. The production index remained barely positive, falling 4 points to 50.3.
Economic Optimism Index Components
The IBD/TIPP Economic Optimism Index is a composite of three major subindexes. They track views of near-term prospects for the U.S. economy, the outlook for personal finances, and views of how well government economic policies are working.
The six-month outlook for the U.S. economy returned to pessimistic territory, where it remained for much of the fall over China trade war concerns. February's 57 reading was just below the 13-year high of 57.5 in February 2018 that came on the heels of tax cuts. The index registered a low of 32.1 in December 2007 as the U.S. economy entered recession.
The personal finances subindex fell 3.2 points to 61.2, still strongly optimistic. The index, which launched in 2001, hit a record 66.7 in October 2018 before financial markets hit turbulence late that year.
The federal policies subindex sank 5.3 points to 52.6 in the March poll. February's 57.9 reading was the highest since June 2002.
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