The RealClearMarkets/TIPP Economic Optimism Index, a leading gauge of consumer sentiment, dropped 1.1% in March to 43.5. The index has remained in negative territory for 31 consecutive months since September 2021.
Reflecting the recent stock market gains, optimism among investors gained 2.8% from 49.3 in February to 50.7 in March, while it dropped by 2.9% among non-investors, from 41.3 in February to 40.1 in March.
The RCM/TIPP Economic Optimism Index has established a strong track record of foreshadowing the confidence indicators issued later each month by the University of Michigan and The Conference Board. From February 2001 to October 2023, TIPP released this index monthly in collaboration with its former sponsor and media partner, Investor's Business Daily.
RCM/TIPP surveyed 1,419 adults from February 28 to March 1 for the March index. The online survey utilized TIPP's network of panels to obtain the sample.
The index and its components range from 0 to 100. A reading above 50.0 signals optimism and a reading below 50.0 indicates pessimism. 50 is neutral.
The RCM/TIPP Economic Optimism Index has three key components. In March, two of these components declined, while one showed improvement.
- The Six-Month Economic Outlook, which measures how consumers perceive the economy's prospects in the next six months, dropped from 39.6 in February to 38.9 in March, marking a 1.8% decrease. In October 2023, this component posted 28.7, its lowest reading since the index debuted in February 2001.
- The Personal Financial Outlook, a measure of how Americans feel about their own finances in the next six months, improved 0.7% from its previous reading of 53.4 in February to 53.8 this month. In January, the component crossed above the neutral reading of 50.0 and has since remained in positive territory for the third month.
- Confidence in Federal Economic Policies, a proprietary RCM/TIPP measure of views on the effectiveness of government economic policies, declined from 39.0 in February to 37.9, reflecting a 2.8% drop.
RCM/TIPP also releases our companion index, called the RCM/TIPP Financial-Related Stress Index, the only metric to track the financial stress felt by Americans monthly.
The Financial-Related Stress Index increased by 1.6 points, or 2.5%, from 64.0 in February to 65.6 in March.
The metric recorded 70.5 in October, its highest reading since December 2008 (71.0). Since October, the stress index declined steadily from 70.5 to 64.0 for four consecutive months, only to increase in March.
The higher the number, the more stress. Readings above 50 signal increased stress, while those below 50 indicate lower stress, with 50 considered neutral. For context, the last time the index posted below 50.0 was before the onset of the pandemic in February 2020, when it stood at 48.1.
“There's a popular notion about periods of tranquility and their theoretical impact on sentiment. More realistically, there are never any real stretches of quietude, as there's always something. It's hard not to wonder if the turbulence that defines the day-to-day isn't playing a role in declining optimism," said John Tamny, the editor of RealClearMarkets.
"Echoing the stock market's strong performance, investor optimism increased in the March survey. The share of respondents who think the U.S. is in a recession remained steady at 43% in March, and the share who think the economy is improving dropped to 27% from 30% last month," said Raghavan Mayur, president of TechnoMetrica, who directed the survey. "Financial stress increased after easing for four months. The national debt, ongoing layoffs, food prices, and the unrest in the Middle East and associated supply chain woes threaten the U.S. economy. TechnoMetrica believes that the U.S. will be in an extended stagflationary period in the months ahead."
Economic Optimism Index Breakdown
This month, only three of the 21 demographic groups we track, including age, gender, race, and education, are in positive territory above 50 on the Economic Optimism Index. In contrast, there were two in February and five in January. Ten of the 21 groups improved on the index, compared to 10 in February and 19 in January.
For the Six-Month Economic Outlook component, only one of the 21 groups that RCM/TIPP tracks scored in optimistic territory, compared to one in February and four in January. Economic Outlook sentiment improved for 10 of the 21 groups, compared to 11 in February and 19 in January.
For the Personal Financial component, 16 of the 21 groups that RCM/TIPP tracks were in optimistic territory compared to 18 in February and 15 in January. Twelve groups rose in March, six in February, and 18 in January.
For the Federal Policies component, only two of the 21 groups were above 50.0, compared to one in February and four in January. Six groups rose vs. 12 in February and 17 in January.
