August Consumer Sentiment Down Due to Stock Market Decline

Ann Arbor, MI, August 31, 2015—The final result for consumer sentiment in August was 91.9, down 1.3% from July’s reading of 93.1.

However, the result is 11.4% above the August 2014 figure, which was 82.5.

“How will consumers react to volatile stock prices?” asks survey of consumers chief economist, Richard Curtin. “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%. Consumers quickly dismissed the 1987 episode since it didn't involve their jobs or incomes, and today's consumers hold similar favorable views about their job and income prospects. While this preliminary reading must be confirmed by additional data, there is every reason to expect continued growth. Overall, the data suggest that real personal consumption expenditures will expand by a still healthy 2.9% in 2015, with the pace of growth rising to 3.0% in 2016. Needless to say, consumer sentiment must be carefully monitored in the months ahead.”