December's economic confidence index averaged minus 11 in December, slightly better than averages from July through November. Confidence was a bit lower in December than in early 2015, but better than it's been for most of the time since 2008.
The Economic Confidence Index rose sharply in late 2014 and early 2015 coincident with falling gas prices. In January, Gallup's index reached positive territory, with a monthly score of plus 3, for the first time since the recession. Confidence ebbed slightly in March and April, returning to negative index scores. From May to September, though, the index dropped a bit each month, dipping as low as minus 14 in September. It has since remained below minus 10.
The slight improvement in the overall index in December is attributable to Americans' improved views of the current economy. In December, 25 percent of Americans rated current economic conditions as "excellent" or "good," while 29 percent rated them as "poor." This resulted in a current conditions score of minus 4, up from minus 7 in each of the prior three months and the highest since June. The economic outlook score was minus 18, matching November's score. This was the result of 39 percent of Americans saying the economy is "getting better" and 57 percent saying it is "getting worse." Americans' outlook for the economy is similar to what Gallup has measured since July, but remains down significantly from earlier in 2015.
Not surprisingly, Americans' confidence in the economy is related to their own financial situation. Those in the highest-income households consistently have more confidence in the economy than those in households with the lowest annual incomes.
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 Gallup.com 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.