The RealClearMarkets/TIPP Economic Optimism Index, a leading gauge of consumer sentiment, dropped 1.6% in February to 44.0. The index has remained in negative territory for 30 consecutive months since September 2021.
RealClearMarkets (RCM) is the new sponsor of the TIPP Economic Optimism Index.
The RCM/TIPP Economic Optimism Index is the first monthly measure of consumer confidence. It accurately captures monthly changes, as reflected in other well-known surveys by The Conference Board and the University of Michigan.
RCM/TIPP Economic Optimism Index
The RCM/TIPP Economic Optimism Index has three key components. For the index and its components, a reading above 50.0 signals optimism, and a reading below 50.0 indicates pessimism.
In February, 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, improved from 39.3 in January to 39.6 in February, marking a 0.8% increase. (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, dropped 2.9% from its previous reading of 55.0 to 53.4 this month. In January, the component crossed above the neutral reading of 50.0 and remained in positive territory for the second month.
- Confidence in Federal Economic Policies, a proprietary RCM/TIPP measure of views on the effectiveness of government economic policies, declined from 39.8 in January to 39.0, reflecting a 2.0% drop.
Democrats posted the highest confidence levels in February, at 57.5, despite a 6.2-point decline.
Meanwhile, Republicans’ confidence gained 1.3 points to 32.6 this month. It has stayed in the pessimistic zone for 39 consecutive months since December 2020, after the presidential election.
Independents’ confidence has been in pessimistic territory for 47 months since April 2020, the month after the onset of the pandemic. But, they gained 3.3 points and posted 41.1 on the index in February.
RCM/TIPP considers respondents to be “investors” if they currently have at least $10,000 invested in the stock market, either personally or jointly with a spouse, either directly or through a retirement plan. We classified 36% of respondents who met this criterion as investors and 59% as non-investors. We could not ascertain the status of 5% of respondents.
Boosted by stock market gains, optimism among investors had gained 20% from 45.8 in December to 54.9 in January. However, it moderated in February and undercut the neutral level of 50.0 to record 49.3, a 10% drop.
Non-investor confidence has steadily climbed for four months since November, increasing from 32.9 in October to 36.2 in November, 37.5 in December, 39.3 in January, and 41.3 in February.
The economic optimism gap between investors and non-investors was 15.6 in January, widening from 8.3 in December. However, it narrowed back to 8.0 points this month.
Comparing a measure’s short-term average to its long-term average is one way to detect its underlying momentum. For example, if the 3-month average is higher than the 6-month average, the indicator is bullish. The same holds if the 6-month average exceeds the 12-month average.
In February, all three components and the Economic Optimism Index are higher than their three-month moving averages. Furthermore, the three-month moving averages for all the components and the Optimism Index are higher than the six-month moving average. As a result, the data shows a positive momentum.
The number of groups in the positive zone indicates the breadth of optimism in American society. This month, two of the 21 demographic groups we track—such as age, income, education, and race—are above 50.0, indicating optimism on the Economic Optimism Index. Starting with three groups in January 2023, we saw steady improvement, peaking at nine groups in April and then declining to one group in August. Since August, it has moved in the range of one to six. Meanwhile, ten of the 21 groups showed increased confidence in February, compared to 19 in January and eight in December.
Inflation acts as a form of indirect tax on American households. According to our survey, 82% are worried about inflation. One-half (50%) are very concerned, and another 32% are somewhat concerned.
Even though the CPI rate has declined from a 40-year high of 9.1% in June 2022 to 3.4% in December 2023, Americans continue to be hurt because real wages have not improved.
The Federal Reserve believes that long-run inflation of 2%, measured by the annual change in the price index for personal consumption expenditures, is most consistent with its maximum employment and price stability mandate.
We will cover inflation in greater depth after the upcoming release of the CPI on February 13 next week.
Four in ten (43%) Americans believe we are in a recession, while 23% are unsure. 34% believe we are not in a recession. Note that those who believe we are in a recession showed a notable seven-point drop from 50% to 43% in January. Again, in February, 43% said the U.S. is in a recession.
Further, over one-half (59%) think the U.S. economy is not improving, while 30% believe it is improving.
The national debt crossed $34 trillion in January. On average, the government has borrowed $250,000 for each American household and is paying upwards of $1 trillion annually in interest—more than the allocation for national defense.
One downside of ballooning federal debt is that refinancing becomes challenging. Supply and demand in the bond market will drive interest rates. If there is a high supply of government bonds (due to high debt levels), interest rates may need to stay high to attract investors and ensure that the government can continue borrowing money.
Most Americans are concerned about the sustainability of this trajectory. The high interest rates are also hurting Americans and sapping their confidence.
Despite our positive report, the economic outlook and confidence are, at best, mixed. We anticipate a stagflationary economy in 2024. The risks on the downside outweigh those on the upside. Watch the real estate market, the stock market, and the job market, and see if Washington can pass spending bills.
Using an online survey, TIPP polled 1,402 adults nationwide from January 31 to February 2. Our next report will be released on Tuesday, March 5.
Geopolitics, Geoeconomics, And More
“A short while ago, the Hamas movement delivered its response to the framework agreement to the brothers in Qatar and Egypt,” a statement said, referring to “a comprehensive and full ceasefire.”
The militant group has for more than a week mulled the deal drawn up in its absence at Paris talks as international pressure mounts to end the four-month war. Qatari Prime Minister Mohammed bin Abdulrahman Al-Thani said Doha had received a “positive” response from Hamas to the truce plans.
2. Saudi FM: ‘No Diplomatic Relations With Israel’ Without Independent Palestinian State – Al Arabiya
Saudi Arabia has affirmed to the U.S. that “there will be no diplomatic relations with Israel unless an independent Palestinian state is recognized on the 1967 borders with East Jerusalem”, the Saudi Press Agency reported, citing the Kingdom’s Foreign Ministry.
It also said there would be no diplomatic relations until Israeli “aggression” on the Gaza Strip stops and all Israeli occupation forces withdraw from Gaza.
Israeli strikes on Syria’s Homs killed five people, including three civilians, a war monitor said, with Syria’s defense ministry reporting an unspecified number of civilians dead.
Last week, the United States carried out strikes on Iran-backed groups in Syria and Iraq, killing dozens in retaliation to a deadly attack on its troops in Jordan. Israel had also struck targets in Syria twice that week.
The organizers of the Eurovision Song Contest are under increasing pressure to exclude Israel from this year’s competition as it wages a devastating war on Gaza.
More than 20 politicians wrote to the European Broadcasting Union (EBU), saying Israel’s participation in the contest “whitewashes a regime that is carrying out ethnic cleansing in Palestine and committing war crimes and genocide.”
Argentina President Javier Milei announced plans to shift his country’s embassy to Jerusalem as he traveled to Israel.
Confirmation of the widely expected announcement found favor with Prime Minister Benjamin Netanyahu, whose office said he “warmly welcomes” the move. Palestinian group Hamas said it “strongly condemns” Milei’s announcement.
6. Russia Summons Israeli Ambassador Amid Anger At Criticisms Of Lavrov, Middle East Policy – Reuters
Israeli Ambassador Simona Halperin was summoned to the Foreign Ministry a day after Russian authorities complained about her “unacceptable comments” in an interview with a Russian newspaper.
Halperin said in the interview that Lavrov had played down the importance of the Holocaust and that Russia was too friendly with the Palestinian Islamist group Hamas, which has been designated as a terrorist organization by the EU and the United States.
Ukraine’s parliament, the Verkhovna Rada, passed laws to extend martial law and military mobilization for another 90 days as Russia’s full-scale invasion nears the two-year mark.
This extension is the 10th time since February 24, 2022, when the Kremlin launched its invasion, that the parliament voted on the two measures. The extension will be in effect until at least May 13.
The U.S. president called out Trump – his expected November election rival – for pressuring Republican lawmakers not to pass a $118 billion bill that would fund Ukraine’s military in return for strict U.S. immigration curbs, a Republican demand.
The “clock is ticking” for Ukraine, Biden warned. “We can’t walk away now. That’s what Putin’s betting on,” Biden said. “Supporting this bill is standing up to Putin. Opposing this bill is playing into his hands.”
Several high-ranking NATO military officials recently warned, within days of each other, that the alliance needs to prepare itself for conflict with Russia.
The commander-in-chief of the armed forces in Sweden, Micael Byden, urged his compatriots and politicians to “move from understanding to action.” Experts see this as a plea from military leaders to European politicians for a change in strategy in the conflict with Russia.
Both military leaders and analysts are concerned about the lack of ammunition and new military equipment and about current arms production capacities in Europe.
A Moscow court has ordered the arrest of Boris Akunin, the pen name of Grigory Chkhartishvili, as part of an ongoing crackdown on critics of its war in Ukraine.
The best-selling detective writer was charged in December with “justifying terrorism” after expressing support for Ukraine in a prank call staged by pro-Kremlin activists. Akunin, currently residing in London, will be detained and taken into custody if he sets foot in Russia.
Cosmonaut Oleg Kononenko has set a new record for the most time spent in space – logging over 878 days over five flights. He will reach 1,000 days on June 5.
Iran is helping the Houthis determine which ships are “more lucrative targets” in the Red Sea as the Yemeni group attacks commercial and military vessels in response to what it says is the Gaza war, U.S. Special Envoy for Yemen Tim Lenderking said in an interview.
The Houthis say they are targeting ships going to and from Israel. But they have targeted commercial vessels that have nothing to do with Israel as well as U.S. and British warships in the region.
Analysts say that Beijing’s military buildup is partly aimed at convincing the U.S. to accept China as a major power.
Some U.S.-based scholars call for a deeper look at China’s political dynamics, especially how domestic politics influence foreign policies. For instance, China’s nuclear arsenal expansion.
Tong Zhao, a senior fellow with the Nuclear Policy Program at the Carnegie Endowment for International Peace, cautioned:
China’s current leadership appears to think that if China can demonstrate greater strategic and military capabilities, especially nuclear capabilities, then that would help convince Washington that Beijing has already become a powerful country.
Major automakers, including Toyota, General Motors, Tesla, BYD, and Volkswagen, maybe using aluminum made by Ugyhur for forced labor in China and have failed to minimize this possibility, Human Rights Watch said in a report.
Nearly 10% of the world’s aluminum is produced in Xinjiang, in China’s northwest, where Uyghurs and other minorities are subjected to forced labor in detention centers or through Chinese government-backed labor transfer programs, which Beijing says are to alleviate poverty, according to the report.
News broke on Tuesday that the “national team” – Beijing-charged fund managers – had stepped in to rescue the market as the country’s three major stock indexes continued to dive.
A staggering 3 trillion yuan (US$422 billion) has been wiped off the Shanghai and Shenzhen stock markets since the end of last year, according to some analysts who say the rescue measures may still be insufficient.
China’s investment in the Belt and Road Initiative (BRI) has expanded to 148 countries in the decade since it was founded in 2013, while investment has surpassed US$1 trillion.
Australia’s government said it had expressed “outrage” to China over the suspended death sentence handed to Chinese-Australian dissident writer Yang Jun.
Yang was sentenced to death on Monday with a two-year suspended execution and had all of his property confiscated, the Chinese Foreign Ministry said. The Beijing court found him guilty of “espionage,” a ministry spokesman said.
The sentence sent a chill through Australia-China relations, which had been improving after a yearslong standoff.
Talks between the two countries began in January. Still, less than 24 hours later, three U.S. service members were killed in an attack in Jordan that the U.S. said was carried out by Iran-backed militant groups in Syria and Iraq.
The talks have since paused then. Iraq’s government says the Islamic State is defeated, and the coalition’s job is over. However, a U.S. withdrawal would likely increase concern in Washington about the influence of arch-foe Iran over Iraq’s ruling elite.
The head of the United Nations political mission in Iraq, Jeanine Hennis-Plasschaert, has told the Security Council she expects to step down at the end of May, adding the country was “on a knife edge.”
While we are, of course, aware that many authorities and actors seek to limit further escalation, it is clear that the situation remains volatile. Iraq – indeed, the wider region – remain on a knife-edge, with the tiniest miscalculation threatening a major conflagration
EU chief Ursula von der Leyen recommended the bloc bury a plan to cut pesticide use in agriculture as a concession to protesting European farmers.
The EU also wants to reduce greenhouse gas emissions by 90 percent by 2040.
The original proposal on pesticides, put forward by her European Commission as part of the European Union’s green transition, “has become a symbol of polarization,” she told the European Parliament in Strasbourg, France.
Australia will propose setting up international standards for ethical and environmentally friendly mining to command higher mineral prices amid a sluggish market and competition from countries like Indonesia.
“It’s a long-term project, but there’s no doubt there’s something I’ll be raising,” Minister for Resources Madeleine King said while visiting Tokyo. King said she would propose the idea at the March PDAC 2024 Convention, a mineral industry trade event in Canada.
The U.S. Air Force’s RC-135U Combat Sent was spotted flying over the Yellow Sea in an apparent mission to monitor North Korea, aviation trackers showed.
According to the U.S. Air Force, the RC-135U collects and examines foreign military land, naval, and airborne radar signals to locate and identify them. The aircraft’s deployment came in the wake of Pyongyang’s spate of weapons tests this year, including its claimed “cruise missile super-large warhead power test” on Friday.
Roughly three out of four South Koreans think their country should develop its nuclear weapons amid concerns about the growing threat from neighboring North Korea, according to a new survey conducted by Gallup Korea.
The poll results found that 72.8% of respondents favored South Korea having its nuclear arsenal. The survey was commissioned by the Chey Institute for Advanced Studies, a Seoul-based think tank.
Republished with permission from TIPP Insights