Economic Confidence Down Last Week, Back to January Levels

Economic Confidence Down Last Week, Back to January Levels
Americans' confidence in the economy declined last week to -29, matching levels not seen since early January. The decline may be due to the estimate of slower-than-hoped second quarter GDP growth. Confidence had peaked at -16 in late May after a series of encouraging jobs reports, but when subsequent reports were less positive, Americans' confidence headed in the opposite direction. Still, confidence is higher now than it was in the latter part of 2011.

The Gallup Economic Confidence Index is an average of two components of consumers' psychology: Americans' ratings of current economic conditions and their perceptions of whether the economy is getting better or getting worse. The economic outlook component of the index accounted for the overall change in economic confidence, declining seven percentage points to -29 over the past week. Sixty-two percent of Americans now say the economy is getting worse, while 33% say it is getting better. Americans' perceptions of current economic conditions are unchanged at -28, with 14% saying conditions are excellent or good and 42% saying poor.

For most of the year, Americans have been less negative about the economy's direction than about current conditions, but now the two are rated similarly.

Confidence declined last week across all political parties. Confidence among Republicans declined to -56, erasing all gains made the previous week, and among independents, it slipped to -33. These are the lowest confidence readings of 2012 for both Republicans and independents. Democrats are also less confident than they were a week ago, but at +5, their level of confidence is still an improvement over their negative ratings in early January.

The wide party gaps are explained in large part by the fact that the majority of Democrats (55%) feel that the economy is getting better, while the majority of Republicans (83%) and independents (63%) say it is getting worse.

Implications

Economic confidence has not been able to maintain the positive momentum seen during the first half of 2012. As the U.S. government's unemployment rate fell in late 2011 and early 2012, economic confidence improved. However, in recent months, unemployment has been stuck around 8.2% and the economy shows little sign of significantly improving in the near future.

Americans may sense the lack of positive momentum, reflected in the growing majority opinion that the economy is getting worse, and thus, their confidence is declining. Democrats alone are somewhat upbeat in this regard, indicating that they feel the current administration still has the ability to turn the economic situation around. The jobs report that the U.S. Bureau of Labor Statistics releases on Friday will likely play an important role in economic confidence in August. If it is positive, it may counteract the disappointing GDP report. However, if it is negative, it may send economic confidence further downward.
From: http://www.gallup.com
Updated: July 31, 2012