US Economic Confidence Index Hit New High in January

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The FINANCIAL — Americans’ confidence in the U.S. economy remained strong in January. Gallup’s U.S. Economic Confidence Index averaged +11, the highest monthly average in Gallup’s nine-year trend. However, the index has been slightly lower so far in February.

Some of January’s three-day averages also marked new highs in Gallup’s tracking since 2008. The index peaked at +19 for the Jan. 21-23 three-day average after President Donald Trump’s inauguration and shortly before the Dow Jones industrial average hit a new high.

However, the index’s high point did not last. The three-day averages have since dipped to smaller single-digit scores, including a +8 average for Feb. 3-Feb. 5.

January’s +11 score marks the third consecutive month the index has been in positive territory. This is a new feat for an index that has had mostly negative monthly measures since its inception, except for January and February 2015, according to Gallup.

Gallup’s U.S. Economic Confidence Index is the average of two components: how Americans rate current economic conditions and whether they feel the economy is improving or getting worse. The index has a theoretical maximum of +100 if all Americans were to say the economy is doing well and improving, and a theoretical minimum of -100 if all Americans were to say the economy is doing poorly and getting worse.

In January, 31% of Americans rated the economy as “excellent” or “good,” while 21% said it was “poor,” resulting in a current conditions score of +10 — marking the highest monthly reading for this component since 2008.

The economic outlook component also reached a new high score of +11 in January. This score was the result of 52% of Americans saying economic conditions in the country were “getting better,” while 41% said they were “getting worse.”

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Republicans’ Confidence Sees Double-Digit Gains in January

Gallup found an immediate improvement in Republicans’ confidence in the economy after the November presidential election, and their confidence has only grown since Trump took office. In January, the index rating among Republicans was +27, up 11 points from December’s score of +16. Independents’ +5 index score in January remained steady from their +3 reading in December.

Meanwhile, Democrats’ confidence has fallen each month since October, with their index score now at +4 — their lowest since the aftermath of the federal government shutdown in October 2013.

Overall, confidence remains higher than it was before the 2016 election. While Republicans’ January +27 score matches Democrats’ October 2016 score, Democrats today are much more positive about the economy than Republicans were before the election. Independents are also significantly more positive now than they were before the election.

Bottom Line

Republicans’ improved confidence in the economy upon Trump taking office was perhaps expected, as Democrats enjoyed similar levels of confidence during President Barack Obama’s tenure. But with the inauguration confetti now settled, Americans of all political stripes will need to see results of an improving economy to maintain this high degree of confidence, which already appears to be slipping in early February’s three-day rolling averages.

The promising jobs report from the Bureau of Labor Statistics could be the strong footing Trump needs to maintain this elevated level of economic confidence. Americans may also feel bolstered by the robust Dow Jones industrial average, which hasn’t yet lost its recent gains.

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