Gallup's Economic Confidence Index jumps 10 percentage points to -25 in week following bin Laden's death, the highest weekly confidence level since mid-February

PRINCETON, New Jersey , May 10, 2011 (press release) – Gallup's Economic Confidence Index improved 10 percentage points in the week after Osama bin Laden's death, May 2-8. This surge in confidence brought the Index up to -25, the highest weekly confidence level since mid-February and just three points shy of what it was during the same week in 2010. The question is whether this sharp improvement is a temporary "halo effect" or a key turning point in consumer optimism.

Although economic confidence was at a 2011 weekly low point of -39 during the week ending April 24, it improved to -35 the next week, just prior to the announcement of bin Laden's death. The Index surged to -25 last week after the U.S. military operation that resulted in his death, coincident with an expected "rally effect" in President Obama's approval rating.

Gallup Daily tracking suggests that the six-point surge in Americans' approval of Obama may also have had a "halo effect" on consumers' economic perceptions last week, meaning that jubilation and positivity about this international "rally event" carried over to other consumer perceptions. Still, the precise extent to which the U.S. killing of bin Laden affected Americans' current confidence in the economy is unknown.

Gallup's Economic Confidence Index consists of two measures: one involving Americans' views about whether the U.S. economy is "getting better" or "getting worse" and Americans' ratings of current economic conditions as "excellent," "good," "only fair," or "poor." Both measures showed substantial improvement last week.

Optimism About Economic Outlook Surges in Response to Bin Laden's Death

Americans' optimism about the economy rose last week, with 37% saying it is "getting better" -- up six points from the previous week. This is the highest level since mid-February and within four points of where such optimism stood during the comparable week in 2010.

"Poor" Ratings Tumble

The percentage of Americans rating current economic conditions "poor" improved to 43% during the week ending May 8 -- down four points from the previous week, and the lowest level of negativity on this measure in just over a month. The measure shows little change from the 44% "poor" rating of the same week a year ago.

Implications

Economic confidence surged last week coincident with Americans' positive reaction to bin Laden's death, but other factors likely also contributed. For example, the government reported that the economy created a larger-than-expected 244,000 jobs in April, consistent with Gallup's Job Creation Index, despite an increase in the U.S. unemployment rate to 9.0%. What was generally perceived to be a good jobs report combined with Mother's Day celebrations probably added to Americans' positivity at the end of the week.

The drop in commodity prices including oil last week is more of a stretch in terms of driving confidence. Lower commodity prices are good news for consumers, although most Americans will not see the benefits until they see lower prices at the retail counter. Similarly, Federal Reserve Board Chairman Ben Bernanke held the Fed's first-ever news conference the previous week, telling Americans the Fed plans to continue providing liquidity for the economy but not adding new liquidity in the form of another round of so-called quantitative easing. While this seemed to be a positive for Wall Street, it's not clear the Fed's efforts had much of a direct effect on U.S. consumers.

The surge in economic confidence, like that in Obama's approval rating, has the potential to fade, as do the good feelings surrounding bin Laden's death as Americans get back to focusing on their day-to-day lives. On the other hand, this major event does offer the opportunity for policymakers to create some positive economic momentum by building on today's increased economic confidence.

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