US: Gallup US ECI

Tue Jun 02 07:30:00 CDT 2015

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level -7 -3

May economic confidence index declined to an average of minus 7 in May, down from minus 3 in April. This drop continues the monthly downward drift since confidence peaked at plus 3 in January and is the lowest monthly score since the minus 8 in November 2014. However, confidence remains much higher now than what Gallup has found in most months since Americans started to feel the recession's effects in 2008.

In January, the index averaged plus 3, the first time since the recession that it had a positive monthly average. This higher confidence was most likely related to a drop in gasoline prices across the U.S. However, the index began deteriorating after that and has had negative monthly averages since March, including May's average of minus 7.

The ECI is the average of two components: Americans' ratings of current economic conditions and whether they feel the economy is improving or getting worse. Both components dropped between April and May, continuing the downward slide, but expectations about the economy's direction are clearly suffering the most so far this year. The economic outlook component score was minus 10 in May, based on 43 percent of Americans saying the economy is getting better and 53 percent saying it is getting worse. The outlook score was down five points from the minus 5 found in April, and is the lowest monthly economic outlook score in Gallup Daily tracking since October. By contrast, the current conditions score in May was minus 4, based on 25 percent of Americans saying the economy is "excellent" or "good" and 29 percent calling it "poor." The May current conditions score is the lowest since December.

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.