The RealClearMarkets/TIPP Economic Optimism Index, a leading gauge of consumer sentiment, improved by 1.7% in October to 46.9, posting its 18-month high since May 2023. Since September 2021, the index has remained in negative territory for 38 consecutive months. October’s reading of 46.9 is 4.5% lower than its historical average 49.1.
Optimism among investors gained 5.7% from 52.9 in September to 55.9 in October, while it decreased by 0.5% among non-investors, from 42.5 in September to 42.3 in October.
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 1,491 adults for the October index from October 2 to October 4. 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 October, two of the three components improved.
- The Six-Month Economic Outlook, which measures how consumers perceive the economy's prospects in the next six months, improved from 44.8 in September to 47.3 in October, marking a 5.3% 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 38 consecutive months since September 2021.
- The Personal Financial Outlook, a measure of how Americans feel about their own finances in the next six months, increased by 0.7% from its previous reading of 53.2 in September to 53.6 this month. In June, the component dropped below 50.0. It bounced back above 50.0 in July and has remained positive for four consecutive months.
- Confidence in Federal Economic Policies, a proprietary RCM/TIPP measure of views on the effectiveness of government economic policies, declined from 40.2 in September to 39.7 this month, reflecting a 1.3% drop. Similar to the outlook component, this component has been below 50.0 in the pessimistic territory for 38 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 worsened 0.9 points, or 1.3%, from 66.9 in September to 67.8 in October, its highest reading for 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.
The index’s historical average since December 2007 stands at 60.2. October's reading of 67.8 surpasses this historical average by 12.6%, indicating that Americans are experiencing approximately 13% 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 67.8 in October.
“It wasn't long ago that economists with gloomy 'forecasts' in hand were demanding 'emergency' interest rate cuts to prop up an economy allegedly reliant on the Fed. Here lies the difference between fallacious economic modeling, and the sentiment of the actual individuals who comprise what we call an economy. That RCM/TIPP continues to reveal an economic situation at odds with those created by economists is a feature of RCM/TIPP, not a bug,” said John Tamny, the editor of RealClearMarkets.
"Americans’ economic confidence improved in October for the fourth consecutive month. However, 84% are worried about inflation. Further, another 80% are concerned about a slowdown in the next 12 months. The share of respondents who think the U.S. is in a recession dropped slightly to 44%, from 47% in September, while the share who believe the economy is improving maintained at 28% without change from the last month," said Raghavan Mayur, president of TechnoMetrica, who directed the survey." Financial stress increased slightly in October, posting its highest reading for 2024. Inflation, food prices, gasoline prices, and government spending continue to threaten the U.S. economy.”
Economic Optimism Index Breakdown
This month, only eight 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 seven in September, three in August, and four in July. Fourteen groups improved on the index, compared to 17 in September, 12 in August, and 21 in July.
For the Six-Month Economic Outlook component, only seven of the 21 groups that RCM/TIPP tracks scored in optimistic territory, compared to five in September, two in August, and three in July. Economic Outlook sentiment improved for 16 of the 21 groups, compared to 16 in September, 16 in August, and 19 in July.
For the Personal Financial component, 17 of the 21 groups that RCM/TIPP tracks were optimistic compared to 14 in September, 13 in August, and 13 in July. Twelve groups rose in October compared to 14 in September, nine in August, and 21 in July.
For the Federal Policies component, only three of the 21 groups are above 50.0, compared to three in September, one in August, and two in July. Eight groups rose compared to 16 in September, four in August, and 19 in July.
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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