The FINANCIAL — Americans’ confidence in the economy continued to fall last week. Gallup’s U.S. Economic Confidence Index slid three points to -17 after also declining three points the prior week. This is the lowest the index has been since September 2014, and comes as international markets struggle amid volatility in China’s stock market.
Americans’ confidence in the U.S. economy has been sensitive to international turbulence recently — such as in July, when Greece’s agreement on a debt deal remained uncertain.
Gallup’s three-day rolling averages show confidence fell to as low as -21 for Monday through Wednesday last week, based on interviews conducted after Monday’s steep U.S. stock market losses. Confidence recovered a bit later in the week as the stock market stabilized, and the current three-day average, based on Saturday through Monday interviewing, is -14.
The last two weeks’ drops in confidence are consistent with the broader decline seen since February. At the end of 2014, the index entered positive territory for the first time since Gallup began tracking it daily in 2008 — and remained positive until mid-February, when the weekly average dropped to -2. Since then, the index has gradually sunk further into the negative zone, with the latest score marking a new low for 2015.
The Economic Confidence Index is the average of two components: how Americans rate current economic conditions and whether they feel the economy is getting better or getting worse. The index has a theoretical maximum of +100, if all Americans were to rate the economy as “excellent/good” and “getting better,” and a theoretical minimum of -100, if all Americans were to rate the economy as “poor” and “getting worse.”
Americans’ Economic Outlook Most Pessimistic Since July 2014
Americans’ perceptions of the economy’s direction continued to sour last week, as the outlook component score fell four points to -25, the lowest weekly average since late July 2014. This latest average is the result of 35% of Americans saying the economy is getting better and 60% saying it is getting worse.
The current conditions score suffered far less by comparison, averaging -8 and down two points from -6 the previous week. The most recent score is the result of 23% of Americans rating the current economy as excellent or good and 31% rating it as poor.
U.S. Economic Confidence for August at 11-Month Low
Like the weekly figure, the monthly figure for August is also at an 11-month low. The reading for August is -13, down a point from -12 in July. The monthly average reflects the more positive readings from earlier in August as well as the more negative readings later in the month, particularly those in the last week.
While Gallup’s weekly economic confidence figures reflect the sharp drop in Americans’ confidence at the end of August, other measures of consumer confidence covering the entire month do not reveal this drop. Similar to Gallup’s monthly Economic Confidence Index for August, the University of Michigan Consumer Sentiment Index shows a roughly one-point decrease from July, while the Conference Board Consumer Confidence Index shows an increase in confidence since July.
The plunge in China’s stock market has caused repercussions far beyond Asia, sending financial markets worldwide into tailspins last week. In the U.S., combined losses of over 1,000 points in the Dow Jones industrial average have pushed Americans’ economic confidence further into negative territory. Late last week, U.S. markets appeared to stabilize somewhat — in part because of positive indicators of the strength of the domestic economy, including a much better than initially reported GDP growth rate for the second quarter. While the Dow still struggles amid uncertainty in Asia, Americans’ economic confidence seems to be recovering.