The RealClearMarkets/TIPP Economic Optimism Index, a leading gauge of consumer sentiment, rebounded sharply by 9.1% in July to 44.2. Since September 2021, the index has remained in negative territory for 35 consecutive months. July’s reading of 44.2 is 10.2% lower than the historical average of 49.2.
Optimism among investors gained 15.3% from 46.5 in June to 53.6 in July, while it increased by 4.5% among non-investors, from 37.7 in June to 39.4 in July.
The RCM/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. 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 1,389 adults from June 26 to June 28 for the July index. The online survey utilized TIPP's network of panels to obtain the sample.
The index and its components range from 0 to 100. A reading above 50.0 signals optimism and a reading below 50.0 indicates pessimism. 50 is neutral.
The RCM/TIPP Economic Optimism Index has three key components. In July, all three components showed improvement.
- The Six-Month Economic Outlook, which measures how consumers perceive the economy's prospects in the next six months, improved from 36.8 in June to 40.7 in July, marking a 10.6% gain. In October 2023, this component posted 28.7, its lowest reading since the index debuted in February 2001.
- The Personal Financial Outlook, a measure of how Americans feel about their own finances in the next six months, improved by 8.4% from its previous reading of 47.9 in June to 51.9 this month. In January, the component had crossed above the neutral reading of 50.0. It remained above 50.0 in the positive territory for five consecutive months, only to drop below 50.0 in June. It bounced back above 50.0 in July.
- Confidence in Federal Economic Policies, a proprietary RCM/TIPP measure of views on the effectiveness of government economic policies, improved from 36.7 in June to 40.0 this month, reflecting a 9.0% gain.
RCM/TIPP also releases our companion index, known as the RCM/TIPP Financial-Related Stress Index, the only metric to track the financial stress felt by Americans monthly.
The index increased 0.3 points, or 0.5%, from 65.9 in June to 66.2 in July.
The higher the number, the more stress. Readings above 50 signal increased stress, while those below 50 indicate lower stress, with 50 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.
Further, its average since 2010 stands at 59.4. July's reading of 66.2 surpasses this historical average by 11.5%, indicating that Americans are experiencing approximately 11.5% higher financial stress levels than usual.
Notably, the index peaked at 70.5 in October 2023, marking its highest reading since December 2008 (71.0). Since then, it has declined for the better, reaching 66.2 in July.
“The only constant in the United States is progress, and that's true even when it seems we're not progressing. In that case, it's easy to forget that the seeds of booms and optimism are planted amid pessimism. Hopefully, some of this can be found in the upswing for the RCM/TIPP Index,” said John Tamny, the editor of RealClearMarkets.
"The consumer sentiment is brighter in July, driven by investor optimism. However, 84% are concerned about inflation. The share of respondents who think the U.S. is in a recession increased slightly to 46%, up from 44% in June, while the share who believe the economy is improving rose from 25% in June to 28% in July," said Raghavan Mayur, president of TechnoMetrica, who directed the survey. "Financial stress increased a notch in July. Inflation, food prices, the national debt, unrest in the Middle East, and associated supply chain issues threaten the U.S. economy.”
Economic Optimism Index Breakdown
This month, only four of the 21 demographic groups we track, including age, gender, race, and education, are in positive territory above 50 on the Economic Optimism Index. For comparison, there were two in June, two in May, and five in April. All 21 groups improved on the index, compared to five in June, five in May, and six in April.
For the Six-Month Economic Outlook component, only three of the 21 groups that RCM/TIPP tracks scored in optimistic territory, compared to one in June, one in May, and two in April. Economic Outlook sentiment improved for 19 of the 21 groups, compared to 15 in June, four in May, and nine in April.
For the Personal Financial component, 13 of the 21 groups that RCM/TIPP tracks were in optimistic territory compared to five in June, 12 in May, and 11 in April. Twenty-one groups rose in July, compared to two in June, 11 in May, and two in April.
For the Federal Policies component, only two of the 21 groups are above 50.0, compared to one in June, one in May, and three in April. Nineteen groups rose compared to four in June, five in May, and 17 in April.
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 five election cycles. The tippinsights unit provides editorials and commentaries on national and international issues, often appearing on the RealClearPolitics website.
About RealClearMarkets
RealClearMarkets (RCM) is a one-stop shop for market-related news, analysis, and commentary. RealClearMarkets collects and publishes business, finance, and economic content from across the ideological spectrum. Site features include Market Data, Off the Street Blogs, Quotes, Research Reports, Videos, Topics, and Facts & Fallacies.
RealClearMarkets falls underneath the umbrella of RealClear Media Group's(RCMG) brands, sites that span a spectrum of passions and interests. Visit realclearmediagroup.com today.
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