Gallup’s U.S. Economic Confidence Index tipped into positive territory last week for the first time since January 2008 when the Great Recession was just starting to unfold. The Index averaged +2 for the week ending December 28, suggesting that Americans are feeling the accelerating economic recovery and the plunge in energy prices.
Gallup’s three-day rolling averages during the week of December 22-28 ranged from -2 to +4. These dates include the lead-up to the Christmas holiday, an especially busy time for the economy. However, this same Gallup data from past years does not reveal a consistent pattern of Americans’ overall economic confidence increasing during the Christmas season. This is important because it suggests that the latest improvement is more attributable to structural, rather than seasonal, factors.
After months of little movement, the Economic Confidence Index started its climb in mid-September. While various factors likely contributed to the rise in economic confidence, the price of gasoline in the US began to fall precipitously in the late summer and, over the last four months, the price has fallen by over 30% — an economic boon to most Americans.
In fact, the average price of gasoline is as low as it has been since 2008. Additionally, the US stock market rose in December to its highest level in history, while Gallup’s unemployment index fell to the lowest level since its daily tracking began in January 2008. Several other government economic measures also showed a significant uptick in the last half of 2014.
But… isn’t there always a “but”?
Another poll that I have followed for years does not look so rosy. While this poll is not directly correlated with the Gallup poll shown above, the two are related. I’m talking about the Direction of the Country surveys taken by various major pollsters including the Wall Street Journal, Associated Press, New York Times, Rasmussen, Bloomberg and others.
The so-called “Right Direction/Wrong Track” poll is still heavily skewed to the Wrong Track. The latest reading as of December 29 from RealClearPolitics finds that only 27.5% of respondents think the country is headed in the Right Direction, while 64.3% still believe the country is on the Wrong Track, based on the average of eight independent polls in December.
If we look at the Wrong Track (red) line above, we can see that the reading is still well below the highs seen in 2011 and late 2013; however, the trend was higher for most of 2014 before moving slightly lower late in the year when gasoline prices were plunging.
Meanwhile, the Right Direction (black) line has pretty much flat-lined since mid-2013. Both readings have worsened significantly since late 2012. The last time these two readings were even was in 2009, shortly after President Obama took office, and both have worsened ever since then.
So what do these two charts tell us? The December jump in the Gallup Economic Confidence Index is due largely to the latest collapse in oil and gasoline prices. The improvement in the months leading up to December is likely a reflection of the better than expected GDP reports for the 2Q and 3Q of last year (+4.6% and +5.0%) and the significant improvement in consumer confidence in 2014.
Yet while near-term confidence in the economy is improving, almost two-thirds of Americans still believe the country is headed in the wrong direction longer-term. Count me as one of them! I don’t think this discouraging outlook changes much until we get a new occupant in the White House in 2017, and that of course depends on who the new occupant is.
I also don’t think it changes significantly until we get a handle on our exploding national debt, now at $18.1 trillion. On that point, it was extremely discouraging that the outgoing Congress’ first action following the landslide Republican victory in November was to pass yet another pork-laden $1.1 trillion budget to fund the government through next September, which Obama wasted no time in signing.
I could go on and on, but I’ll leave it there for today.
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