The IBD/TIPP Economic Optimism Index for August fell to its lowest level in more than a year as recession fears waned but inflation concerns revived. Investors turned slightly gloomy with the stock market rally moving to under pressure as Apple and Tesla led a retreat.
The IBD/TIPP U.S. Economic Optimism Index fell 1 point to 40.3. The index has held below the 50 neutral level for 24 consecutive months.
U.S. Economy: Recession Fears Fade
Now 49% of adults polled think a U.S. recession is at hand. That's the lowest level since May 2022, but still high. The number is down from 55% in July and 51% in June. The figure rose as high as 61% in October.
The U.S. economy added 187,000 jobs in July, the Labor Department reported Friday, less than expected. That followed June's downwardly revised 185,000. But it's still a solid figure.
The average hourly wage rose a solid 4.4% vs. a year earlier.
The IBD/TIPP Poll finds that just 16% of adults say their wages have kept pace with inflation, the lowest since at least February 2022. Some 58% say they haven't kept up. That's vs. a 20%-55% split in July.
The PCE price index, the Fed's favorite inflation gauge, showed inflation cooling to just 3% in June. Gasoline prices are down vs. a year earlier, but they have risen significantly over the past month.
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Investors On U.S. Economy
Among investors, the IBD/TIPP Economic Optimism Index fell 2.9 points to 47.7, matching the lowest since June 2022. That's after rising 2.9 points in July, to 50.8.
Among noninvestors, the IBD/TIPP index edged up 0.3 point to 36.7.
IBD/TIPP counts as investors those respondents who say they have at least $10,000 in household-owned mutual funds or equities.
The S&P 500 is up 17.7% in 2023 through Monday. It's only 6.2% below its January 2022 all-time high. The major indexes rose modestly on Monday, but opened solidly lower Tuesday. Last week they fell solidly, pushing the status of the stock market rally to "uptrend under pressure."
Apple stock plunged 7.1% last week, breaking below its 50-day line on Friday following lackluster earnings and guidance. Shares of the Dow Jones tech titan retreated 1.7% on Monday, and edged lower Tuesday morning.
Tesla stock retreated 4.7% last week, continuing a post-earnings slide from late July. The EV giant broke below its 50-day line on Monday, but pared losses to just under 1%. TSLA stock fell 1% Tuesday morning.
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U.S. 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 and personal finances, along with support for government economic policies.
In August, the six-month outlook for the U.S. economy fell 0.3 point to 35.2, still deeply pessimistic. This subindex hit a 15-year low of 30.6 in June 2022.
The personal finances subindex sank 1.3 points to 48.7, the lowest since November. The 45.3 reading in July 2022 was a record low for the IBD/TIPP Economic Optimism Index, which began in February 2001.
Support for federal economic policies retreated 1.4 points to 37.1.
The August IBD/TIPP Poll reflects online surveys of 1,369 adults from Aug. 2-4. The results come with a credibility interval of +/- 2.7 points.
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