US Consumer Confidence Down Sharply In July On Doubts About Government Policies

: Published: Tuesday, 12 July 2011 10:00; Hits: 2510

The IBD/TIPP Economic Optimism Index declined by 3.2 points, or 7.2%, in July posting 41.4 vs. 44.6 in June. The index is 3.9 points below its 12-month average of 45.3 and 3.0 points below its reading of 44.4 in December 2007 when the economy entered into the recession, and 9.0 points below its all-time average of 50.4.

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 904 adults from July 5 to July 10. The margin of error is +/-3.3 percentage points.

The IBD/TIPP Economic Optimism Index has three key components, two of which declined in July.

• The Six-Month Economic Outlook, a measure of how consumers feel about the economy's prospects in the next six months, decreased 4.6 points, or 10.4%, to 39.7. When compared to December 2007, the index shows a gain of 7.6 points.

• The Personal Financial Outlook, a measure of how Americans feel about their own finances in the next six months, advanced 0.3 points, or 0.6%, to reach 51.2.

• Confidence in Federal Economic Policies, a proprietary IBD/TIPP measure of views on how government economic policies are working declined 5.1 points, or 13.2%, to reach 33.4 -- the third time the component goes below 35.0 in the index's history. The previous sub-35 readings occurred in October 2008 (30.9) and July 2008 (32.7).

"The current debt ceiling discussions drive home the fragility of the nation's finances. In addition, the high unemployment and under employment have been the biggest hurdles. This month 24% of households say that at least one member of the household is looking for a full-time job. This translates to roughly 30 million Americans looking for a full-time job," said Raghavan Mayur, president of TIPP, a unit of TechnoMetrica Market Intelligence, IBD's polling partner.

"Americans seem growingly concerned that government can deal with our growing debt crisis," said Terry Jones, associate editor of Investor's Business Daily. "The failure of the stimulus to bring the economy back to life and revive job growth is another big issue, one that has Americans reassessing their faith in big government."

The Breakdown

This month, only two of the 21 demographic groups that IBD/TIPP tracks were above 50 on the Economic Optimism Index. Nineteen groups declined on the index.

On the Economic Outlook component, only two of the 21 groups that IBD/TIPP tracks scored in optimistic territory. Nineteen groups declined and two advanced.

On the Personal Financial component, fourteen of the groups IBD/TIPP tracks scored in optimistic territory. Ten groups advanced on the component and eleven declined.

On the Federal Policies component, only one of the 21 demographic groups tracked was above 50. Nineteen groups declined on the component and two advanced.

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ABOUT THE IBD/TIPP POLL
The IBD/TIPP Economic Optimism Index is the earliest take on consumer confidence each month and predicts with 80% reliability monthly changes in sentiment in well-known polls by The Conference Board and the University of Michigan. The IBD/TIPP Economic Optimism Index is based on a survey of 900-plus adults chosen at random nationwide. The poll is generally conducted in the first week of the month.

For more information, go to www.tipponline.com

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