Slight Uptick in U.S. Economic Confidence in Early August
Fewer rate the economy "poor" and more say it is "getting better"
PRINCETON, N.J., Aug. 10 /PRNewswire-USNewswire/ -- Gallup's Economic Confidence Index improved slightly in early August to -29 -- holding the improved perceptions of late July -- and is now four points better than the average for all of July (-33). The trend suggests Friday's Consumer Sentiment report is likely to show modest improvement as well.
Slightly Fewer Americans Rate U.S. Economy as "Poor"
Part of the recent uptick in Gallup's Economic Confidence Index is the result of fewer Americans (45%) rating current economic conditions as "poor." Although that percentage is the same as the prior week's, it is marginally better than the full July average of 47%.
Slightly More Say Economy Is "Getting Better"
The Economic Confidence Index also improved during the past week because 35% of consumers told Gallup economic conditions are "getting better" in the country as a whole. This is up three points from the July average of 32%.
Analysis and Implications
Given that the stock market had its biggest gains in a year in July, and has held those gains during the first week of August, it may not be surprising that Gallup's Economic Confidence Index has shown modest improvement during late July and early August. Investor sentiment on Wall Street does tend to have at least a modest impact on Main Street consumer confidence.
However, it is becoming increasingly clear that while the success of many U.S. global enterprises may provide profits for U.S. investors, these may not translate into jobs for the many Americans looking for work. Many companies are hiring and investing in the growing emerging markets, not the slow-growth areas of the U.S. and Europe.
On the other hand, the drop in economic confidence of the past several months dating back to April likely reflects the so-called economic soft patch of recent months. As former Federal Reserve Chairman Alan Greenspan mentioned recently, such a slowdown in the midst of a modest economic recovery can feel a lot like a recession.
Probably of greatest concern in this regard are the fears of small-business owners who worry about their future revenues and cash flows. As a result, more of them expect to let go of workers than expect to hire workers over the next 12 months.
In sum, the Federal Open Market Committee faces some difficult issues when it meets Tuesday. As it deliberates, its members should keep in mind that higher equity prices reflect current consumer confidence. In turn, the most effective economic policy for a broad economic recovery might best be directed at improving things on Main Street as opposed to Wall Street.
Gallup.com reports results from these indexes in daily, weekly, and monthly averages and in Gallup.com stories. Complete trend data are always available to view and export in the following charts:
Read more about Gallup's economic measures.
Survey methods for these findings are found here.
Posted: August 10, 2010