U.S. Economic Optimism Index Hits 16-Month High

The IBD/TIPP Poll finds that Americans' economic outlook is brighter than it has been in the past 16 months.

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May 13, 2023 • 3 min read

The IBD/TIPP poll shows that Americans still don't have a positive outlook on the U.S. Economy, but they are more optimistic than in the past 16 months.

The IBD/TIPP U.S. Economic Optimism Index increased by a half point to 47.4 points in April. The index is now at its highest since December 2021. The index, however, remained pessimistic, and below the neutral 50 level, for the 20th consecutive month.

In the last two months, 53% of adults surveyed thought the U.S. was in recession. Now that number has risen to 55%. This figure was 61% in October.

Investors' U.S. Economic Optimism gauge remained high, but fell 3 points to 58.3. The IBD/TIPP index of economic sentiment among non-investors also showed some improvement. It rose 2.8 points, to 39.3.

The 24.8-point gap in optimism between investors and non-investors, which was recorded by the IBD/TIPP Poll for March 2001, is a record.

IBD/TIPP considers respondents as investors if they say that their household owns mutual funds or stocks worth at least $10,000.

Investors had good reason to smile. The S&P 500 closed Monday at its highest level in mid-February. It has recovered all of its losses since a financial crisis erupted with the sudden collapse of SVB Financial Group last month. Federal Reserve believes that tighter credit conditions will slow down the economy later this year. Financial markets have benefited from the prospect of fewer Fed rate increases in the near term.

The S&P500 is up 7.4% this year and 15.3% since the bear-market low of Oct. 12. There have been several bear-market rallies, and it is not clear that this rally will last. You can get the latest information on the stock market by reading The Big Picture, IBD's daily column published in the afternoon.

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Non-investors, however, see less of a reason to rejoice. The inflation rate is still higher than the average hourly wage, which means that households are seeing their purchasing power diminish.

IBD/TIPP poll finds that only 28% of workers believe their wages are keeping pace with inflation. This is down from 30% back in March. In the meantime, 45% of workers say their wages have not kept pace with inflation. This is up from 44% back in March.

The IBD/TIPP Financial-Related Stress Index increased by 2.3 points, reaching 67.9 - the highest level since October last year. Stress levels are reflected in readings higher than 50.

Financial stress has increased after the expiration of $95 pandemic monthly boost for Supplemental Nutrition Program benefits.

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The IBD/TIPP Economic Optimism Index consists of three subindices. The index tracks the opinions of Americans on near-term economic and financial prospects, as well as their support for government policies.

The six-month forecast for the U.S. was the same in April at a dismal 41.6. This subindex reached a low of 30.6 in June last year, the lowest since July 2008 when the U.S. was engulfed in recession.

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The subindex for personal finances rose by three tenths to 55.3. This is the highest level since August 2021 when there was still a bull market in full swing. The IBD/TIPP Economic Optimism Index reading for July was 45.3, the lowest since February 2001.

The support for federal economic policy increased 1.1 points, to 45.3. After a low of 35.3, which was the lowest in eight years, in August 2021 it reached a high of 56.4, following more stimulus checks, and a push from President Biden for more expansive policies. The Federal Reserve has raised interest rates in an attempt to rein in inflation that stimulus caused.

The IBD/TIPP April Poll is based on online surveys conducted by 1,365 adults between March 29 and 31. The results are accompanied by a credibility range of +/-2.8 points.

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