Most Americans Think The U.S. Economy Is In A Recession: IBD/TIPP

The IBD/TIPP Poll finds that a clear majority of Americans think the U.S. economy is in a recession.

The July IBD/TIPP poll shows that a majority of Americans (58%) believe the U.S. is in recession. This is up from 48% in May and 53% one month earlier. The IBD/TIPP Poll found that as inflation offsets wage increases, the outlook for personal finances in the short-term has reached a new low. This is the lowest it's been since February 2001.

IBD/TIPP Economic Optimism Index (an early monthly reading on consumer confidence) edged up by fourth-tenths to 38.5. This is a small improvement from its lowest level since August 2011. The IBD/TIPP Economic Optimism Index, an early monthly read on consumer confidence, edged up fourth-tenths of a point to 38.5. This is a meager bounce from its lowest reading since August 2011.

The pessimistic mood has been in place for the 11th consecutive month. Positive readings are those above neutral 50.

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The IBD/TIPP Economic Optimism Index consists of three subindices. The index tracks the opinions of Americans on near-term economic and financial prospects, as well as their support for government policies.

In June, six-month expectations for the U.S. economic outlook rose by 1.6 points, to 32.2. This was a month after the level had fallen to its lowest since July 2008 when the nation was in recession.

Retirement accounts were hit by the decline in stock markets and inflation, which impacted retirement funds. The subindex for personal finances fell 1.1 points from 45.3 to 45.3. This is the lowest level of the IBD/TIPP Economic Optimism Index since February 2001. Last July, views of personal finances reached a bullish level of 59.7.

The measure of support for federal policies on economics rose by six-tenths to 38. This is a slight improvement over the six-year-low of June. This gauge reached 56.4 in June last year, following more stimulus checks. President Biden also pushed for more expansive policies. The Federal Reserve has raised interest rates in an attempt to rein in inflation that stimulus caused.

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The grim outlook for the near future seems to be at odds with the jobs report from June, released on 8th July. This showed that the U.S. added 372,000 jobs in the month and the unemployment rate remained at 3.6%. The average hourly salary rose by a solid 5.1% compared to a year earlier.

The strength of the U.S. labor market seems to have debunked the idea that the U.S. is in recession.

Problem is, the increase in consumer prices is eating up all of those wage increases, and more, for most Americans. In May, the consumer price index increased 8.6% compared to a year earlier. This is the largest increase in over 40 years.

This is why, inflation-adjusted, consumer spending in May was negative.

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According to the IBD/TIPP poll, only 19% of adult respondents say that their wages have kept up with inflation. 54% disagree. In the meantime, 91% are worried about the direction of inflation in the coming 12 months.

The IBD/TIPP Financial-Related Stress Index dropped 0.2 points to 69.3 at the end of June. This is still close to the record high of 69.8 for April 2020, according to polling dating back to December 2007. Financial stress increases when the readings are above 50.

The IBD/TIPP poll found that despite the tight labor market, 41% of households had at least one person who was unemployed and seeking employment. This is down by 1 point since June. Now, 36% of households are worried about losing their jobs. This is up six points from the previous month. When you take into account the overlap, 53% of households are job-sensitive, which is unchanged since June.

Investors' views on the economy firmed up a little in July, as oil prices slowed and the stock markets remained largely flat despite some rough seas.

The U.S. Economic Optimism Index rose 1.4 points, to 48.3, among self-described investor respondents. However, it remained in the pessimistic zone for a third consecutive month. IBD/TIPP considers respondents as investors if they own at least $10,000 worth of mutual funds or stocks in their household.

The Dow Jones Industrial Average was down 15.3% as of Monday's closing price from its highest-ever closing on January 4. S&P 500 is down 19.6% since its peak, and Nasdaq is down 29.2%.

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IBD's The Big Picture daily column is a great way to stay up to date on market trends and how they affect your trading decisions.

Investors are still far more optimistic than non-investors. Noninvestors' IBD/TIPP Index fell six-tenths to 33.5. This is a deeply pessimistic reading.

The IBD/TIPP July Poll is based on online surveys conducted by 1643 adults between July 6 and 9. The results are accompanied by a credibility range of +/-2.5 points.

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