The RealClearMarkets/TIPP Economic Optimism Index, a leading gauge of consumer sentiment, ticked up slightly by 0.7% in August to 44.5. Since September 2021, the index has remained in negative territory for 36 consecutive months. August’s reading of 44.5 is 9.4% lower than the historical average of 49.1.
Optimism among investors dropped 2.2% from 53.6 in July to 52.4 in August, while it increased by 3.3% among non-investors, from 39.4 in July to 40.7 in August.
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 1,488 adults from July 31 to August 2 for the August 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 below 50.0 indicates pessimism. 50 is neutral.
The RCM/TIPP Economic Optimism Index has three key components. In August, one component improved, while the other two declined.
- The Six-Month Economic Outlook, which measures how consumers perceive the economy's prospects in the next six months, improved from 40.7 in July to 43.4 in August, marking a 6.6% gain. In October 2023, this component posted 28.7, its lowest reading since the index debuted in February 2001. The component has been below 50.0 in the pessimistic territory for 36 consecutive months since September 2021.
- The Personal Financial Outlook, a measure of how Americans feel about their own finances in the next six months, declined by 0.2% from its previous reading of 51.9 in July to 51.8 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, declined from 40.0 in July to 38.3 this month, reflecting a 4.3% drop. Similar to the outlook component, this component has been below 50.0 in the pessimistic territory for 36 consecutive months since September 2021.
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 1.4 points, or 2.1%, from 66.2 in July to 67.6 in August. It is the highest reading for the eight months of 2024.
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. August's reading of 67.6 surpasses this historical average by 13.7%, indicating that Americans are experiencing approximately 13.7% 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 67.6 in August.
“Periods of pessimism not infrequently beget optimism as the down times force individual fixes that set us up for optimism,” said John Tamny, the editor of RealClearMarkets.
"The consumer sentiment held steady in August. However, 86% are concerned about inflation. The share of respondents who think the U.S. is in a recession decreased slightly to 45%, down from 46% in July, while the share who believe the economy is improving dropped from 28% in July to 27% in August," said Raghavan Mayur, president of TechnoMetrica, who directed the survey. "Financial stress increased significantly in August. Inflation, food prices, gasoline prices, and government spending threaten the U.S. economy.”
Economic Optimism Index Breakdown
This month, only three 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 four in July, two in June, and two in May. Twelve groups improved on the index, compared to 21 in July, five in June, and five in May.
For the Six-Month Economic Outlook component, only two of the 21 groups that RCM/TIPP tracks scored in optimistic territory, compared to three in July, one in June, and one in May. Economic Outlook sentiment improved for 16 of the 21 groups, compared to 19 in July, 15 in June, and 4 in May.
For the Personal Financial component, 13 of the 21 groups that RCM/TIPP tracks were optimistic compared to 13 in July, 5 in June, and 12 in May. Nine groups rose in August, compared to 21 in July, two in June, and 11 in May.
For the Federal Policies component, only one of the 21 groups is above 50.0, compared to two in July, one in June, and one in May. Four groups rose compared to 19 in July, four in June, and five in May.
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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