Edge In Optimism Hits An 8-Year High

Economic optimism exceeds pessimism by the widest margin in more than eight years in this week’s ongoing Consumer Comfort survey, a fresh sign of improvement in public views of the nation’s economy – but with continued challenges also clear.

Thirty-three percent of Americans now say the economy’s getting better, the most since January 2004, while just 23 percent say it’s worsening – the fewest even longer back, since March 2002. That 10-point edge in optimism is its biggest since that 2002 poll.

This result in the latest survey of consumer sentiment by Langer Research Associates extends a four month advance in expectations; since September, optimism’s gained 11 points and pessimism has lost 15. It’s a trend that can presage improvement in ratings of current economic conditions, and indeed they gained sharply last week, to their best in two and a half years. 

Still the road to recovery can be a fraught one, as this week’s Consumer Comfort Index demonstrates. Based on ratings of the current economy, buying climate and personal finances, it’s slipped after last week’s 5-point improvement, now to -43 on its scale of -100 to +100. 

The CCI’s been at or below -40 steadily since April 2008, compared to a lifetime average of -14 in 25 years of weekly polling. But it’s off the floor, having hit -54 twice about two years ago.

Ebbs and flows are not uncommon – after the 1991-92 recession, the CCI wobbled above and back below -40 several times on the way to its long ascent. But the index’s trend in the past two years has been one of slow, if very gradual, improvement.

Recent economic news likewise is punctuated with gains and setbacks alike. Employment has shown progress, with weekly initial jobless claims dropping to more than a two-year low early this month, and December unemployment slipping below 9.5 percent for the first time in more than a year. But weekly claims have risen the past two weeks. 

Similarly, retail sales rose in December for the sixth consecutive month, according to data released last week. But, while nearly eight percent higher than a year ago, these gains were smaller than expected, and smaller than they’d been the previous two months.  

The CCI ratings have a long way to go. Just 27 percent call it a good time to buy things and 45 percent rate their personal finances positively – both within a point of their 2010 averages. For the second week in a row 13 percent rate the national economy positively – a result mirrored in an ABC News/Washington Post poll released earlier today. While hardly robust, this is the most it’s been in more than two years. 

That ABC/Post poll includes other hints of economic improvement, including a 9-point drop since September in the number of Americans who say President Obama’s policies have made the economy worse. And this week’s expectations result in the CCI also shows a political aspect: Views that the economy’s improving have increased most sharply in the past four months among Republicans and independents. Democrats, perhaps still licking their wounds after the 2010 midterms, haven’t budged.

Analysis by Julie E. Phelan, research analyst, Langer Research Associates.

Click here for tables with this week’s CCI data.

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