Investor optimism declined across all four geographic regions of the United States during the second quarter of 2004, according to quarterly aggregates from the UBS/Â鶹´«Ã½AV Index of Investor Optimism*. Across the country, optimism in each region generally returned roughly equal or just below fourth quarter 2003 levels after rising briefly in the first quarter of 2004. Southerners remain the most optimistic investors, followed by those in the West, and then Midwestern investors. Investor optimism is not only lowest in the East, but that region also experienced the biggest decline of any from the first quarter of 2004.
Southern Region
In the South, the average overall Index of Investor Optimism score declined from 119 in the first quarter to 103 in the second. The drop put investor optimism in the South just about where it was during the fourth quarter of 2003 (106).
In the second quarter, the Index's Personal Dimension, which tracks investors' optimism about their own personal investment situations, declined six points to 73 in the South -- just slightly above its fourth quarter level of 70. The South's average score on the Economic Dimension of the Index, which measures optimism about the country's overall economic situation, decreased 11 points to 29 -- well below its fourth quarter 2003 level of 36.
Western Region
In the West, the Index's overall average fell 13 points in the second quarter, from 95 to 82. The overall Index in the West is now just below its fourth quarter 2003 level of 86.
Breaking the Index down into its components, the Personal Dimension in the West declined five points between the first and second quarters of 2004, from 68 to 63. The Economic Dimension tumbled eight points to 19.
Eastern Region
Overall investor sentiment in the East dropped sharply in the second quarter and now stands at 51 -- down significantly from 78 in the fourth quarter of 2003 and 77 in the first quarter of 2004.
The Personal Dimension in the East fell 13 points, from 59 in the first quarter to 46 in the second quarter. The Economic Dimension continued its decline -- falling from 22 in the fourth quarter of 2003, to 18 in the first quarter of 2004, then down to 5 in the second quarter of 2004.
Midwestern Region
Investors in the Midwest also showed a decline in overall optimism in the second quarter. The overall Index fell 12 points, from 81 in the first quarter to 69 in the second quarter of this year -- dropping below its fourth quarter 2003 level of 77.
In the Midwest, the Index's Personal Dimension ticked down six points to 54 in the second quarter. The Economic Dimension of the Index also fell seven points, from 21 in the first quarter to 14 in the second.
Bottom Line
Throughout the country, investors were substantially less optimistic in the second quarter of 2004 than they were in the first quarter of the year. As a result, investor optimism in all regions of the country is now no better or is slightly lower than it was in the fourth quarter of 2003. Although each region experienced a decline, the decline in the East was most dramatic.
An April Tuesday Briefing article noted that if the March 2004 trend in the markets continued, investor optimism would be down in the second quarter of 2004 (see "Investors Maintain Bright Outlook in First Quarter" in Related Items). This turned out to be the case. In turn, the decline in investor optimism during the second quarter does not bode well for the economy during the third quarter of 2004.
On the other hand, investor optimism did turn up toward the end of the quarter, in June. Third quarter optimism results will be brighter if the uptick is sustained, rather than a short-lived "blip."
*Results are based on telephone interviews with more than 800 investors nationwide, aged 18 and older, conducted monthly since January 2000. For quarterly results based on these total samples, one can say with 95% confidence that the margin of sampling error is ±2 percentage points. Each region consisted of at least 421 interviews per quarter. For quarterly regional results based on these total samples, one can say with 95% confidence that the margin of sampling error is ±5 percentage points.
Â鶹´«Ã½AV identifies these states as "East": Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, Connecticut, New York, New Jersey, Pennsylvania, and Delaware
Â鶹´«Ã½AV identifies these states as "Midwest": Ohio, Michigan, Indiana, Illinois, Wisconsin, Minnesota, Iowa, Missouri, North Dakota, South Dakota, Nebraska, and Kansas
Â鶹´«Ã½AV identifies these states as "South": Virginia, North Carolina, South Carolina, Georgia, Florida, Kentucky, Tennessee, Alabama, Mississippi, Arkansas, Maryland, Louisiana, Oklahoma, and Texas, West Virginia, and the District of Columbia
Â鶹´«Ã½AV identifies these states as "West": Montana, Arizona, Colorado, Idaho, Wyoming, Utah, Nevada, New Mexico, California, Oregon, and Washington
