You know the economy is not great when even McDonald’s is starting to complain that business is not up to par. They released a statement on Tuesday this week about how the economy is weaker than anticipated and sales are dropping.
McDonald’s and other big brands warn that low-income consumers are starting to crack
Some of America’s best-known corporations are saying their consumers are being pinched by inflation as prices continue rising.
Inflation has dominated corporate America’s discourse over the past three years following the pandemic-induced easing of monetary policy and trillions of dollars in Covid relief. Though the pace of price growth has cooled since the Federal Reserve began raising interest rates in early 2022, consumers are still feeling the squeeze — and often tightening purse strings — as costs continue climbing.
“It is clear that broad-based consumer pressures persist around the world,” McDonald’s
CEO Chris Kempczinski said on the fast-food chain’s earnings call early Tuesday. “Consumers continue to be even more discriminating with every dollar that they spend as they faced elevated prices in their day-to-day spending.”
Sticky inflation has created a dark cloud over how everyday Americans perceive the health of the economy. Consumer confidence in April hit its lowest level since mid-2022 as high prices remained top of mind, according to data released Tuesday by the Conference Board.
Worker pay has continued rising, as evidenced by first-quarter employment cost statistics released Tuesday. But so, too, have the prices paid by the typical consumer, biting into the extra income from those higher wages.
To be sure, the rate of inflation has fallen significantly. The consumer price index — a broad basket of goods and services — rose at an annual rate of 3.5% in March compared with the same month a year ago.
That’s far below the 40-year high of 9.1% seen in mid-2022 but remains above the 2% goal set by the Fed, whose officials have pointed to stubborn inflation as the reason for keeping interest rates higher.
And that tenacious 3.5% annual growth is souring economic sentiment: Even after a period of runaway inflation, prices don’t actually fall. That’s a problem for McDonald’s and a host of other firms serving customers who are feeling sticker shock.
AC