The so-called “headline effect” caused by this past week’s stock market volatility is impacting consumer confidence, according to the latest confidence reading from the University of Michigan.

The university’s Consumer Sentiment Index dropped 1.2 points in August to 91.9, the lowest reading in the past eight months. The survey’s “current economic circumstances” portion of the index fell 2.1 points to a reading of 105.1. And the “expectations” component dropped 0.7 points to a reading of 83.4, which is the lowest it’s been since last November.

The sentiment survey is one of two that the Federal Reserve uses in determining interest rate moves.

Surveys of consumers chief economist Richard Curtin of the university explained that the “Black Mondays of October 17, 1987, and August 24, 2015, represent two episodes when the stock market declined mainly due to reasons other than the domestic economy. Prior to each stock decline, the Sentiment Index was very positive, but immediately following, it fell by about 10 percent.”

Curtin said consumers “quickly dismissed the 1987 episode” because it did not directly affect their employment or income. And today’s consumers hold similar views, he said, adding that the core economic metrics point toward an improving economy.

“While this preliminary reading must be confirmed by additional data, there is every reason to expect continued growth,” he said. “Overall, the data suggest that real personal consumption expenditures will expand by a still healthy 2.9 percent [this year], with the pace of growth rising to 3 percent in 2016. Needless to say, consumer sentiment must be carefully monitored in the months ahead.”

Chris Christopher, director of consumer markets at IHS Global Insight, said the preliminary August sentiment reading implies “that stock market volatility is actually having an impact on consumer sentiment. In the latter part of August, economic circumstances deteriorated much more than in the first portion.”

The timing of the stock market declines was unfortunate. “Just as consumer sentiment was likely to make a comeback in the latter part of August, the financial markets went into a tizzy,” Christopher said. “Consumer sentiment took a beating in July as consumers became more pessimistic in their economic and financial outlook due to the volatility in equity markets and worries over the financial issues in China and Greece. Once the equity markets calmed down in the last half of July and early August, consumer sentiment inched down only 0.2 points in the mid-August reading.”

Low energy prices and an improved employment outlook as well as “gaining traction” in the housing sector bodes well for consumer confidence, the analyst said — as long as U.S. stock markets stabilize.

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