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U.S. Economic Confidence Improving but Still Weak
Economy

U.S. Economic Confidence Improving but Still Weak

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Story Highlights

  • Economic Confidence Index improves from -51 to -39
  • Americans say inflation and the government most important U.S. problems
  • All party groups more confident now than in June

WASHINGTON, D.C. -- Americans are significantly less negative in their evaluations of the U.S. economy than they were in July, with Â鶹´«Ã½AV's Economic Confidence Index improving from -51 to -39. The index recently hit a 13-year low of -58 in June, the worst since the Great Recession. Confidence has now returned to the levels it was at in March and April.

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The current rating from an Aug. 1-23 poll still ranks among the lowest Â鶹´«Ã½AV has measured since confidence plummeted at the beginning of the COVID-19 pandemic, dropping from +41 in February 2020 to -32 in April of that year.

Â鶹´«Ã½AV's Economic Confidence Index summarizes Americans' assessments of current economic conditions and their view of whether the economy is getting better or worse. The index has a possible range of -100 to +100. The theoretical low score would result from all Americans rating current economic conditions as "poor" and saying the economy is "getting worse." The theoretical high would be achieved if all Americans rated current economic conditions as "excellent" or "good" and said the economy is "getting better."

Since Â鶹´«Ã½AV began measuring economic confidence in 1992, the highest score obtained was +56 in January 2000 at the tail-end of the dot.com boom. The lowest was -72, registered in October 2008 during the Great Recession and financial crisis that threatened major U.S. banks.

Americans Less Pessimistic About Current Economy and Its Trajectory

Currently, 16% of U.S. adults rate current conditions as excellent or good, while 47% describe them as poor. An additional 36% say they are "only fair." In July, 14% rated conditions positively and 52% poorly.

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Also, 25% of Americans now say the economy is getting better and 72% say it is getting worse. In July, those figures were 16% and 80%, respectively.

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The August improvements in economic perceptions are likely related to the decline in U.S. gas prices, which are now more than $1.00 lower than they were in June. The most recent employment report showed the unemployment rate at 3.5%, tied for the lowest since 1969. The report also found job growth far exceeding what it has been in previous months, and what economic experts were predicting. Currently, 69% of U.S. adults say it is a good time to find a quality job, five percentage points below the all-time high measured last October.

But concerns about inflation are keeping economic confidence negative overall. Eighteen percent of U.S. adults name it as the most important problem facing the U.S., consistent with results back to March -- and the highest Â鶹´«Ã½AV has measured for that issue since the early 1980s. Inflation has essentially tied the government as the top overall problem since March.

Another 14% of Americans name the economy in general terms as the most important problem, ranking third on the list, with no other issue named by more than 6% of U.S. adults. U.S. economic growth, as measured by the Gross Domestic Product, has contracted over the past two quarters, which is often the standard used to signify an economic recession.

All Party Groups Show a Recovery in Confidence

Americans' evaluations of the economy are greatly influenced by their political partisanship. Historically, those who identify with the president's political party give the most charitable ratings of the economy, and those who identify with the other major party give the most critical ratings, with political independents in between. However, all three groups are typically responsive to changes in the economic environment, so their confidence levels shift up or down in response to good or bad economic news even though the party gaps remain.

Between May and June, all three party groups showed a decline in confidence, with a greater decline among Democrats than among Republicans, who already rated the economy very negatively.

In the past two months, the three groups have recovered the lost confidence, and all are essentially back to the level they were at in March and April. As such, Democrats' confidence has improved more in recent months than confidence among independents or Republicans.

Currently, the economic confidence index score is -3 for Democrats, -43 for independents and -76 for Republicans.

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Bottom Line

As gas prices have declined and inflation appears to be leveling off, Americans have grown more confident in the state of the U.S. economy. Yet, gas prices and inflation remain elevated compared with where they were a year ago, and economic growth is declining. These factors all contribute to Americans rating the economy negatively overall.

The prospects for more substantial improvement in economic confidence are likely tied to significant reductions in inflation, which continues to be uppermost in Americans' minds about the country's biggest problems.

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