On news that the U.S. gross domestic product rose 3.5% in the third quarter and continued signs of ongoing momentum in the stock market, the Dow Jones Economic Sentiment Indicator rose to 36.9 in October, up from 34.1 in September. It was the gauge’s highest reading since August 2008.
The indicator is based on news coverage in 15 major daily newspapers in the U.S., as opposed to the national surveys that the University of Michigan Consumer Sentiment Index and the Conference Board Consumer Confidence Index use.
Dow Jones found that while those two indexes dropped in October, due to news of continued job losses, the news media focused on the stock market’s rebound, improved corporate earnings and GDP growth. Over the past 12 months, the Dow Jones indicator has risen in 10 of those months since its low of 22.2 in November 2008.
“The ESI’s strong rise since its lows in November 2008 shows the U.S. economy is clearly getting better, a message confirmed by the big jump in third-quarter GDP,” said Alen Mattich, a columnist with Dow Jones. However, because the indicator is still in the low range, he added, “the recovery remains vulnerable to reversal. In the past two cycles, an economic upturn wasn’t firmly established until the ESI reached the upper 30s or lower 40s.”