Economic Optimism Took Off — Just As Coronavirus Hit: IBD/TIPP
Optimism over the U.S. economy surged to a 16-year high in late January, the latest IBD/TIPP Poll found. The U.S. economy couldn't be in much better shape to weather the emerging coronavirus threat or support President Donald Trump's reelection prospects. Support for federal economic policies hit the highest level since mid-2002.
The IBD/TIPP Economic Optimism Index rose for a fifth straight month, gaining 2.4 points to 59.8, the highest level since January 2004. The prior Trump-era high of 58.6 came in May, just before President Trump blew up the first China trade war cease-fire. But optimism has surged in the five months since trade talks turned constructive, leading to last month's phase-one China trade deal. Readings above the neutral 50 level reflect optimism.
The six-month economic outlook gauge jumped 5.9 points to a two-year high of 57. Still, the near-term outlook for the U.S. economy has become more clouded since polling began Jan. 23. The Dow Jones Industrial Average slid 603 points on Friday, while the 10-year Treasury yield fell to 1.52% — near its low point at the height of the China trade war.
China's economy is reeling as Beijing takes unprecedented steps to slow the spread of the coronavirus, which has overwhelmed the health care system in Wuhan. The World Health Organization declared a global health emergency on Jan. 30, the last day of polling.
Economic Optimism Index Components
The IBD/TIPP Economic Optimism Index is a composite of three major subindexes. They track views of near-term prospects for the U.S. economy, the outlook for personal finances, and views of how well government economic policies are working.
The six-month outlook gauge for the economy is up 14 points since September. It's now just below the 13-year high of 57.5 in February 2018 that came on the heels of tax cuts. The index registered a low of 32.1 in December 2007 as the U.S. economy entered recession.
The personal finances subindex dipped two-tenths of a point to 64.4, still strongly optimistic. The index launched in 2001 and hit a record 66.7 in October 2018 before financial markets hit turbulence late last year.
The federal policies subindex rose 1.5 points to 57.9. That's the highest point since June 2002.