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IBD/TIPP Economic Optimism Index Drops in November, Putting Confidence in Neutral Territory

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The IBD/TIPP Economic Optimism Index, a leading national poll on consumer confidence, today revealed that consumer confidence slipped to neutral. November’s Economic Optimism Index declined by 9.4% overall, putting it right at 50.0. For the IBD/TIPP indexes, a reading above 50 signals optimism and below 50.0 indicates pessimism. The index was in a strong position leading into November, thanks to its significant rise (22.7%) in October.

The IBD/TIPP Economic Optimism Index has established a strong track record of foreshadowing the confidence indicators issued later each month by the University of Michigan and The Conference Board.

IBD/TIPP surveyed 1,324 adults from November 4 to November 6. Due to COVID-19, the poll was conducted online using TechnoMetrica’s network of online panels to provide the sample.

Republicans and Democrats tend to view the economy positively when the president hails from the same political party. With the November survey taking place right after the election and Joe Biden increasingly likely to be the victor, a partisan shift may be underway.

Republicans’ economic optimism tumbled from 74.0 to 57.9, their lowest reading since November 2016, when Donald Trump was elected. Meanwhile, Democrats’ view of the economy jumped to a nearly break-even 49.1 from 42.5 in October and 32.9 in September. That’s the highest reading since November 2016.

In addition to the Economic Optimism Index, IBD/TIPP surveyed respondents on key political issues for the separate Presidential Leadership Index and National Outlook Index as well as the Financial Related Stress Index.

This month, the Presidential Leadership Index increased again, though by a far more modest margin. While October’s index climbed by 21.8%, the index rose from 47.0 to 47.6 (1.3%) in November. Again, all three components of the index increased, but each component remains below 50.0. The Leadership component rose the most at 2.1%, with a reading of 48.1– its highest in six months.

Conversely, the National Outlook Index declined in November. Coming off of October’s 26.6% rise, November’s index fell by 7.0%. It moved from 48.6 last month to 45.2 this month. The Morals and Ethics component dropped the most at 12.6% in November, moving from 36.4 to 31.8. The Standing in the World component also declined by double digits, returning to negative territory. The component fell 11.2%, moving from 53.4 in October to 47.4 this month.

Financial stress increased by 2.6% in November. The Financial Related Stress Index moved from 65.0 last month to 66.7 this month. The reading continues to keep the index above 50.0. A reading over 50.0 equals more financial stress while a reading below 50.0 on this index would indicate consumers feel less stress. This index has been above 50.0 since March.

“After seeing very hopeful signs across the respective indexes in October, November reveals some instability,” said Ed Carson, IBD’s news editor. “The presidential election has dominated news cycles over the past several weeks, and consumers appear to feel a bit conflicted amid a close, contested race. With a new president set to take office in January and renewed hopes that a stimulus bill will pass in short order, we are likely to see more fluctuations in the months to come.”

The flagship IBD/TIPP Economic Optimism Index has three key components. This month, all three declined.

  • The Six-Month Economic Outlook, a measure of how consumers feel about the economy’s prospects in the next six months, had the biggest drop, moving from 54.1 in October to 47.0 in November. This 13.1% decline returned the component to negative territory.
  • The Personal Financial Outlook, a measure of how Americans feel about their own finances in the next six months, fell by 5.6%. The component moved from 58.9 in October to 55.6 this month.
  • Confidence in Federal Economic Policies, a proprietary IBD/TIPP measure of views on how government economic policies are working, returned to negative territory as well, falling 10.1%. The index moved from 52.6 last month to 47.3 this month.

“Despite a blowout GDP report at the end of October, showing that the U.S. economy grew by more than 30% last quarter, 47% of Americans believe we are in a recession. And with good reason: their personal job situation looks grim — 46% of households have at least one person looking for a full-time job. Another 42% are concerned about job loss in the household. The share of job-sensitive households is currently 61%,” said Raghavan Mayur, president of TechnoMetrica, who directed the poll. “With the election now behind us, and hopefully new jobs and a stimulus plan on the way, these are numbers we should watch closely heading into the holidays.”

Economic Optimism Index Breakdown

This month, nine of 21 demographic groups — such as age, income, race and party preference — that IBD/TIPP tracks are above 50, in positive territory, on the Economic Optimism Index. That’s down vs.15 in October, but up vs. just three in September, four in August, two in July, four in June, nine in May and six in April. Only three groups rose this month vs. all 21 in October, seven in September, 17 in August and two in July and June.

For the Six-Month Economic Outlook component, eight of 21 groups that IBD/TIPP tracks scored in optimistic territory, vs. 13 in October and just one in the prior three months. Optimism over the economy’s six-month outlook rose among just four groups, after all 21 did in October.

For the Personal Financial component, 18 groups IBD/TIPP tracked were in optimistic territory, vs. 20 in October, 13 in September, 15 in August, 11 in July and 10 in June. Just three groups improved vs.19 in October, five in September, 15 in August and 12 in July.

For the Federal Policies component, five of the 21 demographic groups tracked were above 50.0, with one group in neutral and 15 groups below 50.0. In October, 10 groups were above 50.0, vs. two in September, eight in August, one in July and eight in June.

ABOUT THE IBD©/TIPP POLL

The IBD/TIPP Economic Optimism Index is the earliest take on consumer confidence each month and predicts with good 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 1,200 adults conducted using a network of online panels. The national poll is generally conducted in the first week of the month.

For more information, go to www.tipponline.com. To license the IBD/TIPP Poll, please contact IBDlicensing@investors.com.

About IBD

Investor’s Business Daily (IBD) is a leading financial news and research organization recognized for proprietary stock screens, comparative performance ratings and a record of identifying stock leaders as they emerge. The company takes a data-first approach to investing, educating investors about how to invest successfully using tested methods and sound research. IBD has honed its approach over the last 50 years to help investors make smarter decisions. Its stock lists have outperformed the S&P, and its presidential poll, the most accurate over the past four election cycles, was one of only two national polls to accurately predict the outcome of the 2016 Presidential Election. IBD offers a number of interactive stock research tools and provides information for investors of every level. To learn more about all that IBD has available, please visit www.investors.com.

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