US: Gallup US ECI

Tue Jan 06 07:30:00 CST 2015

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Gallup's U.S. Economic Confidence Index averaged plus 1 for the week ending Jan. 4. This is consistent with plus 2 found the week prior, the first readings in positive territory since 2008.

Gallup's Economic Confidence Index dropped as low as minus 65 in late 2008 after the government intervened to prevent the collapse of large financial institutions. Although it had generally moved up from that point, the index stayed in negative territory until two weeks ago. The previous weekly high was minus 3 in the week ending June 2, 2013.

There have been two notable dips in confidence since 2008. The first was a drop to minus 53 in late 2011 after federal government negotiations to raise the debt ceiling led to volatility in the stock market. And more recently in the fall of 2013, the index dropped to minus 39 after the partial federal government shutdown.

Despite the push into positive territory near the end of the month, slightly more pessimistic evaluations of the economy earlier in December held the monthly average for the Economic Confidence Index to minus 5. Still, this is the highest monthly average Gallup has found since daily tracking began in 2008, passing the previous high of minus 7 in May 2013.

Gallup's Economic Confidence Index is the average of two components: Americans' views of current economic conditions and their perceptions of whether the economy is getting better or getting worse. The index has a theoretical maximum of plus 100, if all Americans believe the economy is in excellent or good health and getting better. It has a theoretical minimum of minus 100, if all Americans rate the economy as poor and getting worse. Although those extremes are never likely to be reached, the index is constructed such that positive scores indicate Americans are positive about the economy overall and negative scores that they view it negatively.

In 2014, the monthly current conditions index improved early in the year before flattening out, but then showed sustained improvement in the fall and early winter months. Meanwhile, Americans' perceptions of the outlook for the economy fluctuated between showing increases and decreases before beginning a sustained period of improvement in September.

In December, 24 percent of Americans said the economy was "excellent" or "good" and 29 percent said it was "poor." This resulted in a current conditions score of -5, roughly the same as the -7 in November and among the highest monthly current conditions scores found since February 2008.

The economic outlook score increased five points to minus 4 in December, the highest monthly economic outlook score since May 2013. This was the result of 46 percent of Americans saying the economy was "getting better" while 50 percent said it was "getting worse."

While Gallup's Economic Confidence Index reached higher weekly levels in December than were found earlier in the year, 2014 as a whole was similar to 2013. The yearly average in 2014 was minus 15, just one point higher than minus 16 in 2013. This is attributable to the lower scores earlier in 2014, particularly in March and July when the monthly average was minus 17.

Americans' more positive views of the economy appear to be holding, as Gallup's Economic Confidence Index stayed in positive territory for a second consecutive week. And those positive weekly numbers could continue for the next several weeks because economic confidence typically increases in January. The monthly index has increased between one and 11 points between December and January each year since 2008.

Gallup's Economic Confidence Index is a composite of two questions that Gallup asks daily of a nationally representative sample of 500 adults, aged 18 and older, and reports weekly based on approximately 3,500 interviews. One question asks Americans to evaluate current economic conditions; the other measures their perceptions of whether the economy is getting better or getting worse. The two questions have equal weight in the index, and are reported without revisions or seasonal adjustments. They can also be analyzed separately, providing insight into changes in the overall index. The survey is conducted with respondents contacted on landlines and cellphones

In today's fast-moving, information-loaded environment, consumer attitudes can, and often do, change multiple times between the beginning and the middle or end of a month, and the Gallup index keeps up with these fluctuations. Followers of the metric therefore develop a keen understanding of the degree to which various economic and political events -- including monthly BLS jobs reports, major changes in the stock market, and significant congressional budget actions -- affect consumer attitudes.

Investors are highly sensitive to consumers' mindset as a potential leading indicator of consumer spending behavior. The Gallup index provides a timely reading of consumer attitudes, facilitating precise evaluations of consumers' mood and the drivers of consumer attitudes. The index gives investors a valuable tool to help predict what the other indexes will report each month, which in turn can help investors anticipate any major stock market reactions.

Econoday reports monthly data. Gallup reports results of the ECI on on a daily, weekly, monthly and quarterly basis.

The Gallup Economic Confidence Index has a possible maximum of plus 100 (reached if all Americans rate current economic conditions as excellent or good, and all Americans say the economy is getting better) and a possible minimum of minus 100 (reached if all rate the current economy as poor, and say the economy is getting worse). The zero midpoint indicates either neutral or mixed attitudes about the economy. Gallup has asked the component questions periodically since 1992, monthly since October 2000, and daily since January 2008. Since 1992, the index has ranged from a high of plus 56 in January 2000, coincident with a period of robust U.S. economic performance and a balanced federal budget, to a low of minus 65 in October 2008, during the global financial crisis.