Investor confidence weakened by 9% in January, while overall optimism slipped 1.5%.
Consumer sentiment edged down in January, as the RealClearMarkets/TIPP Economic Optimism Index, the first monthly read on U.S. consumer confidence, slipped from 47.9 in December to 47.2, a 0.7-point or 1.5 percent loss. The index stayed below the neutral 50 level for the fifth straight month, keeping the nation in what we classify as the pessimistic zone.
January’s reading of 47.2 is 3.9% below the 300-month historical average of 49.1, indicating that confidence remains subdued and not yet fully restored.
Investor confidence weakened 9.0% (5.4 points) to 54.5 in January, while non-investor confidence gained 4.1% (1.7 points) to 43.5. The confidence gap between investors and non-investors narrowed from 18.1 to 11.0 points.
The RCM/TIPP Economic Optimism Index has a strong track record of predicting the 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 1,478 adults for the January index from January 6 to January 9. The online survey used TIPP's panel network to obtain the sample.
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. In January, only one of them improved.
- The Six-Month Economic Outlook, which measures how consumers perceive the economy's prospects in the next six months, declined 2.5%, from 44.4 in December to 43.3 in January.
- The Personal Financial Outlook, a measure of how Americans feel about their own finances in the next six months, rose 1.7% from its previous reading of 54.0 in December to 54.9 this month.
- Confidence in Federal Economic Policies, a proprietary RCM/TIPP measure of views on the effectiveness of government economic policies, slipped to 43.5 in January from 45.4 in December, a 4.2% loss.
RCM/TIPP also releases a companion measure, the Financial-Related Stress Index, the only monthly metric tracking Americans’ financial stress. The index dropped 1.3 points (2.0%) from 64.2 in December to 62.9 in January, echoing lesser financial stress 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. January’s reading of 62.9 exceeds the long-term average by 4.0%, signaling heightened financial stress.
“Production remains the constant with Americans, thus consumer confidence that rarely wanes. I take even a slight downturn in RCM/TIPP as evidence of the resiliency of American production,” said John Tamny, the editor of RealClearMarkets.
“Americans’ economic confidence slipped slightly in January,” said Raghavan Mayur, president of TechnoMetrica, which conducted the survey. “Concerns about inflation linger, with food prices standing out as the leading economic worry. However, an over-cautious monetary policy is paralyzing weaker sectors of the economy, such as housing, and dampening public confidence.”
Economic Optimism Index Breakdown
This month, seven 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 December, four in November, and six in October. Nine groups improved on the index, compared to 21 in December, none in November, and nine in October.
For the Six-Month Economic Outlook component, four of the 21 groups tracked by RCM/TIPP scored in optimistic territory, compared to five in December, three in November, and four in October. Economic Outlook sentiment improved for seven groups, compared to 20 in December, two in November, and four in October.
For the Personal Financial component, 19 of the 21 groups tracked by RCM/TIPP were optimistic, compared to 12 in December, 10 in November, and 18 in October. Thirteen groups rose compared to 19 in December, one in November, and 17 in October.
For the Federal Policies component, three of the 21 groups are above 50.0, compared to five in December, three in November, and six in October. Seven groups rose compared to 21 in December, none in November, and eight in October.
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
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
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