McDonald’s is expanding its valued meal menu. The reason suggests an increase in economic troubles, analysts say.
In an interview with CNBC on Tuesday, McDonald’s CEO Chris Kempchinski said the move corresponds to an increase in evidence of a split consumer landscape.
“They feel under a lot of pressure right now, especially with middle and low-income consumers,” Kempczynski said. He added: “It’s really a two-tier economy.”
The idea that the economy is divergent is not new, but the trend appears to be more pronounced. It has recently started to bubble up as the Covid-19 pandemic showed signs of decline and stocks began to surge. Pandemic aid from the government helped level the playing field for some time, but by 2024, inflationary pressures and rising interest rates began to resemble consumers, depending on their ability to withstand financial stress.
By the start of 2025, Moody’s analysis shows that by the start of 2025, 10% of Americans, or at least $250,000 a year, are half of all consumer spending, a record. In comparison, the wealthiest 10% accounted for 36% of all consumer spending 30 years ago.
That’s a continuing trend. While employment growth is showing signs of stalling, cost pressure on businesses and consumers is rising due to tariffs. A new Boston Federal Reserve survey shows that low-income consumers now have significantly higher levels of credit card debt than they did in 2019. Low-income workers have increased the withdrawal of difficulties from their 401(k) retirement plans, Vanguard Financial Services told NBC News.
However, inventory continues to be opened higher than the mainstream. Results: Wealthy consumers are overcoming wider economic uncertainty, but the outlook for everyone else is increasingly stagnating.
“It really is the story of two different households,” said Mark Zandy, chief economist at Moody’s Analysis.
Kempczinski said McDonald’s has discovered an increasing number of customers skipping meals like breakfast or choosing to eat at home. Some low-income cohorts have “double digits” in traffic, he said.
“We had to intervene because of our business, which has that middle-income and a key group of consumers with low incomes,” Kempczinki said.
Other consumer brands, from Chipotle to Coles, reflect Kemputzynsky’s sentiment about the outlook for split consumers.
“We have a specific cohort of consumers and we definitely feel pressure on the low-income side right now,” Chipotle CFO Adam Reimer told Reuters. “That’s something we’ll have to consider when looking at future prices.”
Companies relying on consumer leaps (Amazon, Nike, Nike, Royal Caribbean and Starbucks) have fallen significantly below the rest of the market this year, according to data from the S&P Global Financial Services Group. Meanwhile, the stock market will return to luxury goods groups such as jewelry chains and high-end fashion companies.
In a memo on Monday, an analyst at UBS Financial Group said that McDonald’s announcement is likely to drive other restaurant brands to further promote value delivery. They say the dining group is currently operating “in a challenging macro environment where consumers manage their visits” as a result of lower inflation and lower spending.
On Friday, Wall Street will scrutinise the government’s employment report in August for further signs of pressure on U.S. consumers. Gov. Christopher Waller, considered an ally of President Donald Trump, warned last week that it was likely that employment was delayed. Analysts expect 75,000 net new jobs added, which have not been essentially changed since July.
If the job market continues to weaken, economic stress among middle and low-income consumers could ultimately “trickle up” for high-income people, said Morning Counsel Chief Economist John Lear.
“Many businesses recognize that wealthy is the future of the consumer situation, at least by the end of this year,” he said. “My concern is that a lot of these consumers are there.”
