Economic Optimism at a 5-Year High, Even as Current Conditions Stay Grim

A Third Expect the Economy to Improve in the Next Year

Analysis by Peyton M. Craighill

May 19, 2009

Economic optimism hit a five-year high this week, even as consumer ratings of current economic conditions reversed their recent positive trend.

A third of Americans now say the economy's improving, matching the number who say it's getting worse the first time since January 2004 there've been as many economic optimists as pessimists. The change is striking: The number who say the economy's worsening has plummeted from 82 percent in October, a 28-year high, to 33 percent now. Optimism meanwhile has grown by 31 points.

Click here for a PDF with charts and data table.

The shift is especially striking because economic pessimists have outnumbered optimists by 21 points on average in ABC News polls since 1981. Rarely have optimists equaled pessimists, as now, or exceeded them just 46 times in 290 individual polls. And economic optimism now stands 14 points above it long-term average.

The 33 percent who say the economy is getting worse is below a majority for the third consecutive month (a first in two years) and down 10 points just since last month. The change has a partisan tint: Optimism has risen by 35 points among Democrats and 32 points among independents since October, compared with a 14-point gain among Republicans. The increases have also been sharpest among men and younger adults.

CURRENT INDEX Ratings of current economic conditions are another matter. The ABC News Consumer Comfort Index, based on views of current conditions, stands at -45 on its scale of +100 to -100, halting four weeks of gains and 3 points from the 2009 high, -42 last week. Current sentiment is severely depressed; the CCI is just 9 points from its worst, -54 in January, and 34 points below the index's 23-year average.

There's plenty of reason: Unemployment's 8.9 percent, the highest in 25 years. Gas prices are up 26 cents in the past month to an average of $2.31 a gallon ahead of the summer driving season. And new home construction dropped 13 percent last month.

The CCI is based on Americans' current ratings of the national economy, the buying climate and their personal finances. Only 8 percent rate the economy positively, in single digits for 30 of the last 32 weeks and 30 points below the long-term average.

Twenty-six percent say it's a good time to buy things, essentially unchanged the last five weeks, 11 points below the long-term average and just 8 points above the record low in October and August.

Positive ratings of personal finances, usually the strongest of the three measures, slipped to 48 percent this week after inching above the 50-percent mark the previous two weeks. The current measure is 9 points below the long-term average.

TREND At -45 or better for four weeks, the index is on its best run since October  but that's hardly reason to celebrate. The CCI has been below -40 for a record 56 weeks and hasn't seen positive territory in over two years. Its average of -49 this year compares with a best yearlong average of +29 in 2000 and best week of +38 in January 2000.

GROUPS As usual, the CCI is higher among better-off Americans, but negative across groups for the 12th straight week.

It's -14 among those with the highest incomes but -77 among those with the lowest (the worst since March), -37 among those who've attended college vs. -55 among high school dropouts (the best since March), -33 among men while -57 among women (the worst since February), -43 among homeowners compared with -51 among renters and -41 among whites vs. -60 among blacks.

Partisan differences remain: The index is -32 among Republicans vs. -54 among Democrats and -42 among independents. But that 22-point Republican-Democratic gap is half what it was on average last year, because the CCI's worsened among Republicans.

Here's a closer look at the three components of the ABC News CCI:

NATIONAL ECONOMY Eight percent of Americans rate the economy as excellent or good; it was 10 percent last week. The highest was 80 percent Jan. 16, 2000. The worst was 4 percent Feb. 8.

PERSONAL FINANCES Forty-eight percent say their own finances are excellent or good; it was 52 percent last week. The best was 70 percent, last reached in January 2000. The worst was 41 percent Jan. 25.

BUYING CLIMATE Twenty-six percent say it's an excellent or good time to buy things; it was 25 percent last week. The best was 57 percent on Jan. 16, 2000. The worst was 18 percent Oct. 19, Aug. 10 and Aug. 24, 2008.

METHODOLOGY Interviews for the ABC News Consumer Comfort Index are reported in a four-week rolling average. This week's results are based on telephone interviews among a random national sample of 1,000 adults in the four weeks ending May 17, 2009. The results have a 3-point error margin. The expectations question was asked of 500 respondents May 6-17, 2009; that result has a 4.5-point error margin. Field work by ICR-International Communications Research of Media, Pa.

The index is derived by subtracting the negative response to each index question from the positive response to that question. The three resulting numbers are added and divided by three. The index can range from +100 (everyone positive on all three measures) to -100 (all negative on all three measures). The survey began in December 1985.