US: Gallup US ECI

Tue Aug 04 07:30:00 CDT 2015

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level -12 -8

July's Economic Confidence Index averaged minus 12 in July, down from minus 8 in June and the lowest monthly average since October 2014. The drop is attributable chiefly to Americans' increasing view that the economy is getting worse rather than better.

After six consecutive months of improvement beginning in August 2014, the ECI averaged plus 3 in January, the first time it was in positive territory since Gallup began tracking it daily in 2008. However, the index began dropping in February as gas prices start to rise, and dropped further to minus 7 in May after reports of disappointing economic growth in the first quarter.

The U.S. saw still more erosion in Americans' economic confidence in July as the Greek economic crisis played out and the U.S. stock market reacted to it and to drops in the Chinese stock market. Confidence averaged minus 11 during the last week of the month, July 27-August 2. The current conditions component averaged minus 6 in July, slightly below the minus 4 of June. The July average was the result of 25 percent of Americans rating the current economy as "excellent" or "good" and 31 percent rating it as "poor." In July, 39 percent of Americans said the economy was "getting better," while 56 percent said it was "getting worse." This resulted in an economic outlook score of minus 17, the lowest since August 2014.

The 11-point difference between the components is one of the largest Gallup has found since May 2013. Americans briefly rated the outlook for the economy more positively than they viewed the current economy from December 2014 through February 2015. But since March, Americans have grown increasingly negative about the economy's outlook, while their views of current conditions have soured only slightly.

A number of factors may be affecting how Americans view the direction of the country's economy, including unsettled economic conditions in Europe and in China and the volatility of the U.S. stock market. All of these could be making Americans -- particularly those with higher incomes -- more pessimistic. Although upper-income Americans remain more positive than lower- and middle-income earners about the economy, the gap between the two groups narrowed in July as economic confidence among upper-income Americans was negative for the first time in 10 months.

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.