McDonald’s employees give change to customers.
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Some of America’s best-known companies say their consumers are feeling the pinch from inflation as prices continue to rise.
The pandemic has led to monetary policy easing and Trillions of dollars in COVID-19 relief. Although price growth has slowed since the Federal Reserve began raising interest rates in early 2022, consumers are still feeling the pinch and often tightening wallets as costs continue to rise.
“It’s clear that there continues to be widespread consumer pressure around the world,” McDonald’s Chief Executive Chris Kempczinski said during the fast-food chain’s earnings call earlier Tuesday. “Consumers are becoming more picky about every dollar they spend as they face rising prices on their daily expenses.”
Sticky inflation has cast a dark cloud over Americans’ day-to-day views of the health of the economy.Consumer confidence hit its lowest level since mid-2022 in April, data showed, as high prices remained top of mind Data released on Tuesday Determined by The Conference Board.
First-quarter employment cost statistics released Tuesday confirmed that worker wages continue to rise. But so do the prices average consumers pay, eroding the extra income that comes with higher wages.
To be sure, inflation has fallen significantly. Compared with the same period last year, the consumer price index, which covers a wide range of goods and services, increased at an annual rate of 3.5% in March.
That’s well below the 40-year high of 9.1% in mid-2022, but still above the 2% target set by the Federal Reserve, with Fed officials pointing to stubborn inflation as the reason for keeping rates higher.
Strong annual growth of 3.5% is souring economic sentiment: Even after a period of runaway inflation, prices are not actually falling. That’s a problem for McDonald’s and many other companies that serve customers who are price-shocked.
‘Under pressure’
At McDonald’s, same-store sales growth proves it Slightly below Wall Street expectations. Kempczinski said the Chicago-based company must be “very focused” on affordability to attract diners.
Senior executive at 3MThe maker of Scotch tape and Post-it notes also reported Tuesday, telling analysts that “consumer discretionary spending continues to be weak.” Although 3M’s first-quarter profit and revenue beat expectations, management said it expects consumer spending to be “moderate” this year.
last week, newell brand Chief Executive Chris Peterson joined the chorus of executives citing inflation as a major force plaguing their businesses. Although the owner of Coleman and Rubbermaid products beat analysts’ expectations in the first three months of the year, the company issued soft guidance for profit for the quarter and said revenue would likely decline.
“The categories we compete in remain under pressure and consumers continue to carefully manage their discretionary spending as the cumulative impact of inflation on food, energy and housing costs has outpaced wage growth,” Peterson said.
But not all consumer-facing companies are feeling the pinch.
Colgate Palmolive Chief Executive Noel Wallace said last week that sales growth had largely recovered as “inflation becomes more moderate and prices start to stabilize.”
exist Coca Cola, management has seen the value of consumer attention. Still, U.S. consumers “remain in good shape,” executives said on the soft drink maker’s earnings call Tuesday morning.
—CNBC’s Robert Hum and Amelia Lucas contributed to this report.
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