The U.S. economy is losing steam. Bank woes and other hurdles are to blame.
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A customer waits to order food at a Miami McDonald's on July 26, 2022. The CEO of McDonald's expects the U.S. to experience a mild recession and says customers have grown more reluctant to splurge on or supersize their orders.
From banks to burger joints, the U.S. economy is showing signs of stress as nervous shoppers dial back their spending and anxious lenders keep a tight grip on credit.
A report from the Commerce Department to be released on Thursday
is expected to show slower economic growth during the first three months of the year than in the previous quarter.
And the economy is projected to lose more steam in the months to come, as rising prices and higher interest rates take a toll on families and businesses.
"Our base expectation is for a mild recession in the U.S.," McDonald's CEO Chris Kempczinski said this week.
Although the fast-food chain reported strong sales so far in 2023, customers are less likely to splurge after two years of rising food costs, he said in an earnings call with investors.
"Things like did someone add fries to their order?" Kempczinski said. "We're seeing that go down in most of our markets around the world slightly but it's still going down."
Virginia resident Desiree Prince says she's more budget conscious now than she used to be
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and making decisions about what she spends with an eye on the price tag.
"Once upon a time, I might have said, 'I'd like to have steak and potatoes for dinner,'" Prince said. "Now it's like, 'Let's see what's in the refrigerator and cobble together a meal from things that I already have."
Prince, who lives in Alexandria, is planning a vacation this summer with her mom and sister, but with airfares up nearly 18% this year, they're limiting themselves to places they can go by car.
"We did have to be a bit selective about what we'll be doing on vacation," Prince said. "Do we want to pet the dolphins? That's a bit pricey. Maybe we'll just do the free national park. So we've been frugal with our travels."
Consumers are spending enough to keep the economy going
Spending by consumers like Prince is the biggest driver of the U.S. economy. It has slowed in recent months, though it hasn't stalled out completely.
"The American consumer is the firewall between a recession and an economy that moves forward. And right now the firewall is holding firm," said Mark Zandi, chief economist at Moody's Analytics.
People may not be spending aggressively, "but they are spending enough to keep the economy moving forward," he said.
Zandi believes the U.S. can avoid an outright recession this year, but he argues it won't be easy, especially after the collapse of Silicon Valley Bank and Signature Bank and the resulting drop in lending by other banks.
"The Federal Reserve is still raising interest rates," Zandi said. "You throw into the mix the ill effects of the
Thursday, April 27, 2023 at 9:12 am