Federal Policies Confidence Plunges 11.8% as Overall Index Drops 9.9%
Consumer sentiment fell sharply in April as the RealClearMarkets/TIPP Economic Optimism Index, the first monthly reading of U.S. consumer confidence, declined to 42.8 from 47.5 in March, a 4.7-point (9.9%) drop.
The index has now remained below the neutral 50 mark for eight consecutive months, keeping the nation in what we classify as the pessimism zone.
April’s reading is 12.8% below the 303-month historical average of 49.1, underscoring that economic optimism has fallen well below its long-term norm.
Investor optimism fell 11.1% to 53.0, while non-investor confidence dropped 7.8% to 37.8. The confidence gap narrowed from 18.6 to 15.2 points, as both groups saw significant declines in economic outlook.
The RCM/TIPP Economic Optimism Index has a strong track record of anticipating the consumer confidence indicators later released by the University of Michigan and The Conference Board. From February 2001 to October 2023, TIPP released this index monthly in collaboration with its former sponsor and media partner, Investor's Business Daily.
RCM/TIPP surveyed 1,464 adults for the April index from March 31 to April 2. The online survey was conducted using TIPP's panel network.
The index is measured on a scale from 0 to 100. Readings above 50 indicate optimism, while those below 50 signal pessimism. A score of 50 is neutral.
The RCM/TIPP Economic Optimism Index has three key components, and in April, all three declined.
- The Six-Month Economic Outlook, which measures how consumers perceive the economy's prospects in the next six months, fell 10.5%, from 43.0 in March to 38.5 in April.
- The Personal Financial Outlook, a measure of how Americans feel about their own finances in the next six months, dropped 7.6% from its previous reading of 54.3 in March to 50.2 this month.
- Confidence in Federal Economic Policies, a proprietary RCM/TIPP measure of views on the effectiveness of government economic policies, tumbled to 39.8 in April from 45.1 in March, an 11.8% drop.
RCM/TIPP also releases a companion measure, the Financial-Related Stress Index — the only monthly metric tracking Americans’ financial stress. The index rose 3.3 points, or 5.3%, from 62.4 in March to 65.7 in April, signaling sharply increased financial strain among Americans.
The higher the number, the more stress. Readings above 50 signal increased stress, while those below 50 indicate lower stress. A reading of 50 is considered neutral. For context, the last time the index posted below 50.0 was before the onset of the pandemic in February 2020, when it stood at 48.1.
The index has averaged 60.5 since December 2007. April’s reading of 65.7 exceeds the long-term average by 8.6%, signaling sharply heightened financial stress.
"A sharp drop in the RCM/TIPP Index arguably speaks to the resiliency of the U.S. economy. To see why, stop and imagine what the expected print of the Index would have been based on foreknowledge of an invasion of Iran, which, as we see in a very real price sense, is a global war," said John Tamny, the editor of RealClearMarkets.
“Consumer optimism took a significant hit in April, driven by growing war anxiety, rising gas prices, and deepening concerns about federal economic policies,” said Raghavan Mayur, president of TechnoMetrica. “All three components of the index declined sharply, with confidence in federal policies falling the hardest. While the personal financial outlook remains barely in positive territory, the combination of geopolitical uncertainty and higher energy costs is clearly weighing on household sentiment.”
Economic Optimism Index Breakdown
This month, three of the 21 demographic groups tracked by RCM/TIPP, including age, gender, race, and education, are in positive territory, with scores above 50 on the Economic Optimism Index. For comparison, there were six in March, eight in February, and seven in January. One group improved on the index, compared to seven in March, 18 in February, and nine in January.
For the Six-Month Economic Outlook component, two of the 21 groups tracked by RCM/TIPP scored in optimistic territory, compared to four in March, three in February, and four in January. Economic Outlook sentiment improved for two groups, compared to six in March, 11 in February, and seven in January.
For the Personal Financial component, eight of the 21 groups tracked by RCM/TIPP were optimistic, compared to 13 in March, 19 in February, and 19 in January. Three groups rose compared to six in March, 18 in February, and 13 in January.
For the Federal Policies component, two of the 21 groups exceeded 50.0, compared with five in March, five in February, and three in January. Zero groups rose compared to eight in March, 17 in February, and seven in January.
About TechnoMetrica/TIPP
TIPP is the polling unit of TechnoMetrica, a nationally renowned survey research and market research firm dedicated to providing clients with expert data-driven analysis to facilitate informed decision-making in their businesses. The TIPP Poll is considered the gold standard survey, having the unique distinction of being the most accurate presidential poll in the past six election cycles. The tippinsights unit provides editorials and commentaries on national and international issues, often appearing on the RealClearPolitics website.
About RealClearMarkets
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