The IBD/TIPP Economic Optimism Index slid two points to 50.3 in early February, the lowest since October 2017. The government shutdown helped drag the overall index lower, as confidence in federal economic policies fell to the lowest point in more than a year. The six-month economic outlook gauge also took another tumble, sliding deeper into pessimistic territory. That's despite a stock market rally in January and the end of the government shutdown.
The overall Economic Optimism Index remains barely positive, just above the neutral 50 level. The big question is whether the hit to confidence in the economy is more than a short-term side effect of growing political dysfunction.
Most of the polling came after President Donald Trump declared an end to the record 35-day government shutdown on Jan. 25. The IBD/TIPP Poll reflects 904 responses from Jan. 24 to Feb. 1. The polling period came mostly before the smashing January jobs report on Feb. 1, showing that the U.S. added 304,000 jobs in January.
Economic Optimism Slides On Elections, Stock Market, Government Shutdown
The Economic Optimism Index has backtracked since hitting a 14-year high of 58.0 in August, riding an economic surge courtesy of the Trump tax cuts and federal spending stimulus. Most of the damage to economic optimism has come since the November elections that saw a return of divided government. The stock market sold off sharply in the fourth quarter. The Dow Jones and other indexes had a great January but are still well off all-time highs.
Since early November, pessimism has deepened slightly among Democrats (34.1 from 36.1). Meanwhile, optimism took a moderate hit among Republicans (71.6 from 80.5) and turned to pessimism among independents (48.9 from 53.6).
Economic Optimism Index Components
The Economic Optimism Index is a composite of three major subindexes. They track views of near-term prospects for the economy, the outlook for personal finances, and views of how well government economic policies are working.
The six-month outlook gauge for the economy slumped 2.3 points to 44.5, the lowest since September 2016. 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 slipped one point to 60.0, the lowest since December 2017. The October reading of 66.7, coming as the Dow Jones hit a record high just below 27,000, was a record high for the IBD/TIPP Poll, which dates back to 2001.
Meanwhile, the measure of confidence in federal economic policies slid 2.7 points to 46.3, as the government shutdown ended. The gauge hit a 13-year high of 53.7 in November.
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