US Consumer Confidence Crashes Elevating Recession Risk

: Published: Friday, 05 August 2011 16:10; Hits: 5118

LOS ANGELES (August 5, 2011) — The IBD/TIPP Economic Optimism Index declined by 5.6 points, or 13.5%, to a historic low in August posting 35.8 vs. 41.4 in July. IBD/TIPP began tracking in February 2001. The index is 8.8 points below its 12-month average of 44.6 and 8.6 points below its reading of 44.4 in December 2007 when the economy entered into the recession, and 14.4 points below its all-time average of 50.2.

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 921 adults from July 31 to August 4. The margin of error is +/-3.3 percentage points.

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

• The Six-Month Economic Outlook, a measure of how consumers feel about the economy's prospects in the next six months, decreased 8.0 points, or 20.2%, to 31.7. 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, declined 4.4 points, or 8.6%, to reach its historic low of 46.8. The previous low was 47.3 in June 2008.

• Confidence in Federal Economic Policies, a proprietary IBD/TIPP measure of views on how government economic policies are working lost 4.6 points, or 13.8%, to reach its historic low of 28.8 – the previous low occurred in October 2008 (30.9).

"The weak confidence strongly suggests that the economy has fallen into recession, driven by high unemployment, under employment and low confidence in the government's ability to improve the economy," said Raghavan Mayur, president of TIPP, a unit of TechnoMetrica Market Intelligence, IBD's polling partner. "This month, 29% of households say that at least one member of the household is looking for a full-time job."

"Along with other soft and even recessionary readings from the economy, this is just another sign that Washington's recent policies to stimulate the economy haven't worked as intended," said Terry Jones, associate editor of Investor's Business Daily. "This could have major consequences for the political debate shaping up as we enter an election year."

The Breakdown

This month, all of the 21 demographic groups that IBD/TIPP tracks were below 50 on the Economic Optimism Index. Twenty groups declined on the index.

On the Economic Outlook component, none of the 21 groups that IBD/TIPP tracks scored in optimistic territory. All 21 groups declined.

On the Personal Financial component, five of the groups IBD/TIPP tracks scored in optimistic territory. Two groups advanced on the component and nineteen declined.

On the Federal Policies component, none of the 21 demographic groups tracked was above 50. Seventeen groups declined on the component and four 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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