Economix Blog: A Low in Gallup’s Economic Confidence Index

Americans have given their economy a vote of no confidence. Or at least, very little confidence.

CATHERINE RAMPELL

Dollars to doughnuts.

Gallup’s latest survey shows that Americans are considerably more pessimistic now than they were a year ago. Here’s a chart showing Gallup’s Economic Confidence Index for 2010 and 2011:

The index is based on daily interviews with 500 adults across the country, or about 3,500 people each week. Respondents are asked whether the economy is getting better or worse, and whether current economic conditions are “excellent,” “good,” “only fair” or “poor.” For each question, Gallup subtracts the percentage of people answering negatively from the percentage of people answering positively.

Then the two results are averaged to come up with a value that Gallup calls the Economic Confidence Index. A negative index value means that Americans are more pessimistic, and a positive value means they are more optimistic.

As you can see, the latest index measure was negative 49 (with a margin of error of 2 percentage points), compared to negative 29 a year ago.

Americans have been down on the economy for several years now. The index hit its recession-era monthly low of negative 60 in October 2008, and the highest level it has touched since then was a mere negative 21 (this past January).

These trends are concerning because worries about a poor economy can become self-fulfilling (or at least, self-perpetuating). If people believe the economy will get worse, they’ll hold back on spending and hiring, causing the economy to actually get worse.

Article source: http://feeds.nytimes.com/click.phdo?i=dd8e2d5bd25985410248bde5fdae5672