The economy is McStruggling

Ronald McDonald has some news that’s even more unsettling than the clown’s demonic smile: The US economy is slowing.

McDonald’s reported that US same-store sales declined 3.6% during Q1—the category’s largest drop since the height of the Covid pandemic. Here’s what the rest of the fast-food chain’s mixed-bag earnings report looked like:

• Earnings per share came in at $2.67 adjusted, higher than the $2.66 expected.
• Revenue of $5.96 billion marked a 3% drop and missed forecasts of $6.09.
• But the chain doubled down on its full-year outlook, saying it would spend between $3 billion and $3.2 billion on capex, and will open 2,200 new stores.

“During the first quarter, geopolitical tensions added to the economic uncertainty and dampened consumer sentiment more than we expected,” CEO Chris Kempczinski said on the company’s earnings call.

A McSlowdown ahead?

We already know consumers aren’t McLovin’ all these tariffs, but the economic data hasn’t reflected that in the way shoppers are spending their hard-earned money. For example: On Tuesday, consumer confidence fell to its lowest level since May 2020. But on Wednesday, we found out that consumer spending surged for its biggest monthly gain since 2023.

The problem is that shoppers have been scrambling to buy everything from car seats to iPhones before President Trump’s tariffs take effect, skewing the numbers. However, the fact that people are driving past the golden arches—traditionally a cost-effective place to grab a bite and save a buck—suggests that the penny pinching has already begun.

McDonald’s isn’t the only fast-food chain that has noticed something’s up. Chipotle also noted its same-store sales fell for the first time since 2020, while Starbucks’ same-store sales declined for the fifth straight quarter in Q1. Both pointed to a consumer slowdown as the culprit, which isn’t just bad news for the restaurant industry—it’s bad news for the economy.

“Consumers ended the first quarter on a strong note as they pulled forward some purchases of big-ticket items in anticipation of tariff price hikes and showed some appetite for services such as dining out and hotel stays,” explained EY Senior Economist Lydia Boussour. “In the coming months, we expect price-sensitive consumers will become more judicious with their spending and reduce non-essential purchases.”

Somewhere out there, Ronald McDonald isn’t smiling anymore.—LB