The RealClearMarkets/TIPP Economic Optimism Index, a leading gauge of consumer sentiment, dropped sharply (3.1%) in June to 40.5. Since September 2021, the Index has remained in negative territory for 34 consecutive months. June’s reading of 40.5 is 17.6% lower than the historic average of 49.2.
Optimism among investors edged up 0.4% from 46.3 in May to 46.5 in June, while it slumped by 6.0% among non-investors, from 40.1 in May to 37.7 in June.
The RCM/TIPP Economic Optimism Index is the first monthly measure of consumer confidence. It 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 1,910 adults from May 29 to May 31 for the June Index. The online survey utilized TIPP's network of panels to obtain the sample. A more detailed methodology is available here.
RCM/TIPP Economic Optimism Index
The RCM/TIPP Economic Optimism Index has three key components. In June, two of these components declined, while one showed improvement. 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 Six-Month Economic Outlook, which measures how consumers perceive the economy's prospects in the next six months, improved from 35.7 in May to 36.8 in June, marking a 3.1% 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, declined by 6.6% from its previous reading of 51.3 in May to 47.9 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.
- Confidence in Federal Economic Policies, a proprietary RCM/TIPP measure of views on the effectiveness of government economic policies, declined sharply from 38.5 in May to 36.7 this month, reflecting a 4.7% drop.
Party Dynamics
Democrats showed the highest confidence in June, at 57.9, increasing slightly from 57.5 in May, a 0.7% gain.
Meanwhile, Republicans' confidence declined 2.1 points to 28.4 this month, a drop of 6.9%. Since the last presidential election, it has stayed in the pessimistic zone for 43 consecutive months.
Independents’ confidence has been in pessimistic territory for 51 months since April 2020, the month after the onset of the pandemic. In June, independents dropped 2.6 points, or 7.2%, and posted 33.7 on the Index.
Investor Confidence
Respondents are considered "investors" if they currently have at least $10,000 invested in the stock market, either personally or jointly with a spouse, either directly or through a retirement plan. 31% of respondents met this criterion, and 63% were classified as non-investors. We could not ascertain the status of 6% of respondents.
Optimism among investors gained 0.2 points or 0.4%, from 46.3 in May to 46.5 in June, while it declined by 2.4 points or 6.0% among non-investors, from 40.1 in May to 37.7 in June.
The economic optimism gap between investors and non-investors widened to 8.8 in June from 6.2 in May and 18.3 in April.
According to the RealClearMarkets/TIPP Economic Optimism Index, economic optimism levels for 20 out of 21 demographic groups declined in June 2024 compared to the historic average of the past 281 months.
Momentum
Comparing a measure's short-term average to its long-term average is one way to detect its underlying momentum. For example, if the 3-month average is higher than the 6-month average, the indicator is bullish. If the 6-month average exceeds the 12-month average, the same holds true.
In June, the Economic Optimism Index and its three components are lower than their respective three-month moving averages.
Further, the three-month moving averages are below their six-month moving averages. The data points to a slowdown.
Demographic Analysis
The number of groups in the positive zone indicates the breadth of optimism in American society. This month, two of the 21 demographic groups we track, Democrats (57.9) and Blacks/Hispanics (50.4), are above 50.0, indicating optimism on the Economic Optimism Index. Starting with three groups in January 2023, we saw steady improvement, peaking at nine groups in April and then declining to one group in August. Since August, it has been in the range of one to six. In June, only two groups are in the positive zone.
Five of the 21 groups improved on the Index, compared to five in May, six in April, and 10 in March.
Inflation
The survey showed that 84% are worried about inflation. One-half (52%) are very concerned, and another 32% are somewhat concerned.
Americans continue to suffer because real wages have not increased, despite the CPI rate falling from a 40-year high of 9.1% in June 2022 to 3.5% in March 2024.
The Federal Reserve believes that long-run inflation of 2%, measured by the annual change in the price index for personal consumption expenditures, is most consistent with its maximum employment and price stability mandate.
We will cover inflation in greater detail after the CPI data is released next week.
Recession
Four in ten (44%) believe we are in a recession, while 26% are unsure. 30% think we are not in a recession.
Further, nearly two-thirds (62%) think the U.S. economy is not improving, while 25% believe it is improving.
Fiscal Profligacy
Government spending has spiraled out of control, resulting in a national debt exceeding $34 trillion, which increases by $1 trillion every 100 days.
Most Americans are concerned about the sustainability of government spending. The high interest rates are also hurting Americans and sapping their confidence.
We anticipate a stagflationary economy in 2024. The risks on the downside outweigh those on the upside.
Compare our report to the media's narrative, which highlights the disconnect between the media elite and the real plight of Americans. The media blames 'social media' and 'misinformation' for people feeling bad about the economy.
