The RealClearMarkets/TIPP Economic Optimism Index, a leading gauge of consumer sentiment, rose by 1.5% in December to 54.0, reaching its highest level in 40 months since August 2021 (53.6). The Index had been in negative territory for 38 consecutive months, starting in September 2021, and broke out decisively in November after President Donald Trump's historic return as the 47th President.
December’s reading of 54.0 is 8.3% higher than its historical average of 49.1.
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 1,411 adults on November 27 and 29 for the December index. The online survey utilized TIPP's network of panels to obtain the sample. A more detailed methodology is available here.
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.
RCM/TIPP Economic Optimism Index
The RCM/TIPP Economic Optimism Index has three key components. In December, one of the three components advanced, and two declined.
- The Six-Month Economic Outlook, which measures how consumers perceive the economy's prospects in the next six months, declined slightly by 0.5%, from 55.9 in November to 55.6 in December. Last month, the component broke into positive territory for the first time in 39 months, with an 18.2% gain after remaining below 50.0 in pessimistic territory from September 2021 to October 2024. In October 2023, it posted a reading of 28.7, its lowest 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 3.8% from its previous reading of 61.0 in November to 58.7 this month. Last month’s reading was the highest since March 2020 (61.2), when the pandemic hit the U.S., signaling the expectations of a strong economy under the new president.
- Confidence in Federal Economic Policies, a proprietary RCM/TIPP measure of Americans' views on the effectiveness of government economic policies, increased from 42.7 in November to 47.7 this month, reflecting an 11.7% gain. This component has been below 50.0 (pessimistic territory) for 40 consecutive months since September 2021.
Party Dynamics
With Donald Trump's election as the 47th President, Democrats' confidence tumbled from 62.9 in October to 43.2 in November. However, it increased by 4.4 points or 10.2% in December to 47.6.
Meanwhile, December again saw an increase in Republicans' confidence by 1.7 points to 66.4.
In November, independent voters' confidence rose by 8.6 points, or 20%, to 51.3 after remaining in pessimistic territory for 56 months, beginning in April 2020, shortly after the onset of the pandemic. The Index posted its first positive reading in nearly five years. It gave up 7.2 points or 14.2% in December, retreating to 44.1.
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. One-third (33%) of respondents met this criterion, and 63% were classified as non-investors. We could not ascertain the status of six percent of respondents.
Investor optimism rose by 5.7%, climbing from 57.8 in November to 61.1 in December, while non-investors decreased slightly by 0.4%, from 50.5 to 50.3. The economic optimism gap between investors and non-investors widened to 10.8 points in December, up from 7.3 in November, 13.6 in October, and 10.4 in September.
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; similarly, if the 6-month average exceeds the 12-month average, the same holds.
In December, the Economic Optimism Index and its three components are higher or the same as their respective three-month moving averages, indicating a positive trend. Notice the stair-step pattern confirming the trend.
Demographic Analysis
The number of groups in the positive zone indicates the breadth of optimism in American society. This month, demographic groups in the optimism zone fell from 18 in October to 15. In the immediate aftermath of the election, it had jumped from eight in October to 18 in November, indicating widespread optimism.
Ten groups improved on the Index, compared to 18 in November, 14 in October, and 17 in September.
Economic optimism levels for 16 of 21 demographic groups are higher in December 2024 than the historical average of the past 287 months.
RCM/TIPP Financial-Related Stress Index
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 improved 7.2 points, or 10.7%, from 67.5 in November to 60.3 in December. 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. December's reading of 60.3 surpasses this historical average by a smidgen of 0.1%, indicating that Americans are experiencing normal stress levels. 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 60.3 in December.
Inflation
The survey showed that 80% are worried about inflation. One-half (43%) are very concerned, and another 37% 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 2.6% in October 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.
Recession
One-third (34%) believe we are in a recession, while 37% think we are not. Another 29% are not sure. The share of Americans who think we're in a recession has dropped from 47% in September to 34% in December.
Meanwhile, one-half (50%) think the U.S. economy is not improving, while 33% believe it is improving. The share of Americans having a positive view increased from 27% in November to 33% in December.
John Tamny, the editor of RealClearMarkets, observed:
Progress is as American as apple pie, and the only barriers to it are governmental. The change in sentiment signals a belief that the government was in the way in such a way that optimism was in decline. No longer, it seems. The speculation here is that the electorate feels Donald Trump governs better than he talks and that barriers to progress will soon enough be removed.
To conclude, Americans' economic confidence has soared following the election of Donald Trump as the 47th president, with the optimism index hitting its 40-month high in December. However, the new president has his job cut out for him: 80% of Americans are worried about inflation, and another 75% are concerned about a slowdown in the next 12 months. Financial stress eased significantly in December, recording its 42-month low, a welcome sign of confidence Americans place in the new president's economic policies.
Release Schedule Of RCM/TIPP Indexes For 2025
- Jan 25: Tuesday, January 14
- Feb 25: Tuesday, February 4
- Mar 25: Tuesday, March 4
- Apr 25: Tuesday, April 1
- May 25: Tuesday, May 6
- Jun 25: Tuesday, June 3
- Jul 25: Tuesday, July 1
- Aug 25: Tuesday, August 5
- Sep 25: Tuesday, September 2
- Oct 25: Tuesday, October 7
- Nov 25: Tuesday, November 4
- Dec 25: Tuesday, December 2
