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US consumer companies are feeling the burden of slowing economic growth, with softening demand cutting into sales at companies such as McDonald’s and Starbucks this week.
McDonald’s, the world’s largest restaurant chain by revenues, reported a rare decline in its quarterly profits and said that after several years of promoting higher-end menu items it would refocus on value. The company warned that the slowdown in the US, combined with austerity measures in Europe and a cooling Chinese economy, were changing dining habits, with more people choosing to eat at home.
“It is really starting to constrain consumer behaviour,” said Peter Bensen, chief financial officer of McDonald’s, on Monday. “In several of the markets there [Europe], the eating out market is just simply declining and people are staying at home. And the magnitude of the issues in Europe are having ripple effects around the world.”
Starbucks said on Thursday store traffic was down in June and July amid a weakening consumer environment. The company’s share price fell sharply after it lowered its earnings guidance.
The disappointing corporate performances come as US consumers are pulling back on spending. On Friday, government figures showed US economic growth slowed to an annualised rate of 1.5 per cent, held back by weak consumption.
Executives have begun to accept the protracted economic doldrums. Last week, Muhtar Kent, chief executive of Coca-Cola, said the macroeconomic environment was “increasingly unpredictable” and that companies needed to recognise that the normal ups and downs of the business cycle are a thing of the past.