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Tuesday, January 5, 2016

Economic Confidence Index Slows Slight Improvement

December's economic confidence index averaged minus 11 in December, slightly better than averages from July through November. Confidence was a bit lower in December than in early 2015, but better than it's been for most of the time since 2008.

The Economic Confidence Index rose sharply in late 2014 and early 2015 coincident with falling gas prices. In January, Gallup's index reached positive territory, with a monthly score of plus 3, for the first time since the recession. Confidence ebbed slightly in March and April, returning to negative index scores. From May to September, though, the index dropped a bit each month, dipping as low as minus 14 in September. It has since remained below minus 10.

The slight improvement in the overall index in December is attributable to Americans' improved views of the current economy. In December, 25 percent of Americans rated current economic conditions as "excellent" or "good," while 29 percent rated them as "poor." This resulted in a current conditions score of minus 4, up from minus 7 in each of the prior three months and the highest since June. The economic outlook score was minus 18, matching November's score. This was the result of 39 percent of Americans saying the economy is "getting better" and 57 percent saying it is "getting worse." Americans' outlook for the economy is similar to what Gallup has measured since July, but remains down significantly from earlier in 2015.

Not surprisingly, Americans' confidence in the economy is related to their own financial situation. Those in the highest-income households consistently have more confidence in the economy than those in households with the lowest annual incomes.

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