It’s a boom.
And now US consumers are starting to do silly things with their money.
In a press briefing on Tuesday, Mike Wilson, chief investment officer of Morgan Stanley wealth management, said consumer behavior was starting to show signs of excess as the economic recovery reaches its later stages.
Wilson said the US economy was finally “self-sustaining,” with the Federal Reserve gearing up to raise interest rates as early as this year after several years of emergency interventions.
And now, mid-expansion, Wilson says consumers are starting to really act like it.
Here’s Wilson (emphasis added):
Consumers are feeling pretty good, and they are starting to spend money again, and they’re starting to do dumb things. They’re starting to borrow money, they’re starting to maybe buy that house they shouldn’t or that car they shouldn’t.
Wilson cited three things as encouraging consumer confidence.
First, the unemployment rate is at a six-year low, at 5.1%. And even though wage growth has been relatively sideways, there are more jobs available. Second, household formation is rising, indicating that people are investing more in starting families and living on their own. Lastly, consumers are starting to believe that gas prices will be lower for longer, increasing spending and as a result.
This boom, however, is equally a warning sign that we are approaching the point at which everything starts heading downward.
[Consumers are] going to spend that extra dollar because they’re feeling better. And now, the clock is ticking. We’re into the final part of this recovery. It could last three years, it could last five years, it could last two years, I don’t know. But that excess sort of behavior is starting to happen.
And that’s the worrying part.