The IBD/TIPP Economic Optimism Index slid 3.8 points to 52.6 in early December, matching April’s 2018 low. Even as wage growth has accelerated to a nine-year high, the six-month economic outlook sank to its lowest since just before President Donald Trump won the 2016 election. Midterm election results and recent weakness in the Dow Jones industrial average and overall stock market likely weighed on sentiment.
The Economic Optimism Index remains moderately positive, above the neutral 50 level. But the six-month economic outlook gauge fell sharply, signaling pessimism.
The IBD/TIPP Poll reflects 823 responses from Nov. 26 to Dec. 2. Since the prior month’s poll, the Democrats picked up 40 seats to claim control of the House, though the GOP widened its Senate majority to 53-47.
The IBD/TIPP Economic Optimism Index often sees big swings around election results that may reflect partisan sentiment more than a change in economic conditions. In December, optimism slipped among all three political groupings, but more so among Republicans, falling 6.4 points to a still-bullish 74.8. Meanwhile, optimism slipped 2.7 points to 50.9 among independents and dipped four-tenths of a point to 35.7 among Democrats.
Optimism fell 3.6 points among investors (to 54.2) and noninvestors (50.8) as the Dow Jones and broader stock market went through ups and mostly downs. The Dow Jones and other major indexes were in a stock market correction for much of the time, though they have turned higher.
Economic Optimism Index Components
The Economic Optimism Index is a composite of three major subindexes. They track views of near-term economic prospects, the outlook for personal finances, and views of how well government economic policies are working.
The six-month economic outlook gauge was the big mover in December, sliding 6.8 points to 46.4. The subindex hit a 13-year high of 57.5 in February on the heels of tax cuts.
The six-month personal financial outlook index dipped 1.5 points to 60.8. 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 backtracked 3.1 points to 50.6. The gauge hit a 13-year high in November.
