Bellweather points to a shift in consumer behaviour that is unlikely to revert
McDonald’s has been a bellweather for economic health for decades, so when the company says things are tough, it is worth looking at why.
This latest warning comes from the US where it has suffered its biggest drop in profits since the height of Covid, a fall that it said was driven by people’s concerns over the US economy.
Despite a marketing tie-in with the Minecraft movie and extended price deals, US customers made fewer visits to the burger chain in the first three months of this year, compared to a year ago.
Chief executive Chris Kempczinski puts this down to economics, saying that customers were “grappling with uncertainty”. But he assured investors that the firm could “navigate even the toughest of market conditions”.
Could this perhaps be the start of a trend towards more healthy food? OK, perhaps not, but the extent of the shortfall is staggering.
Revenue at US McDonald’s outlets that have been open at least a year sank 3.6% in the first three months of 2025 compared to a year earlier. That is the steepest decline in like-for-like sales in the US since the three months to the end of June 2020 when pandemic restrictions were in place.
The surprise drop in sales coincided with a contraction in the US economy, which shrank at an annual rate of 0.3% in the first three months of 2025, the first quarterly decline in output since 2022.
McDonald’s has been working for months to try to reignite enthusiasm among customers, after facing a backlash over rising prices, especially from lower income households.
Reacting to the growth figures, President Trump called for patience, saying he needed “a little bit of time” and described the numbers as a reflection of the “Biden economy”, a reference to his predecessor as president.
However, Danni Hewson, head of financial analysis at AJ Bell, said Americans were nervous and cutting back on discretionary spending as a result.
“They’re worried prices will rise even higher and that household budgets, already feeling the impact of previous inflation, will be stretched beyond breaking point,” she said.
“They’re also nervous about the potential for job losses if the economy continues to stutter as businesses try and make sense of an evolving tariff environment.”
McDonald’s figures reflect the first two months of Donald Trump’s presidency, with the reporting period ending just before his barrage of tariff announcements on 2 April. Dubbed “Liberation Day”, that broadside prompted further confusion among many firms and consumers.
Kempczinski said: “Consumers today are grappling with uncertainty, but they can always count on McDonald’s […] for exceptional value”.
“McDonald’s has a 70-year legacy of innovation, leadership, and proven agility, all of which give us confidence in our ability to navigate even the toughest of market conditions and gain market share,” he added.
Commentary
Industry commentators agree. Kristina Haika, a consumer behavior expert at Gavra, points out that McDonald’s has always been the ultimate bellwether for economic stress. “When people can’t afford McDonald’s, you know inflation has moved beyond inconvenient into genuinely painful,” she noted.
“When McDonald’s says they’re losing low-income customers, that’s not just a fast-food story. That’s a canary in the coal mine for the entire consumer economy.”
Haika suggests the numbers tell a stark story. McDonald’s recent earnings report showed traffic declines specifically among households earning under $45,000 annually—the exact demographic that built the Golden Arches empire. “These aren’t customers trading down from sit-down restaurants. They’re already at the bottom of the dining-out ladder,” she said.
“What’s happening is a complete breakdown of the value proposition that made McDonald’s recession-proof for decades,” Haika explained. “A Big Mac meal that cost $5.99 three years ago now runs $12-15 in many markets. That’s not inflation—that’s a fundamental pricing shift that’s pushed fast food into the occasional treat category for millions of families.”
But here’s what makes this different from typical economic cycles: these customers aren’t coming back when they get their next paycheck. They’re changing behavior permanently.
Haika sees this playing out in real purchasing data. “We’re watching families shift to grocery store prepared foods, dollar store staples, and home cooking out of necessity. Once you break the convenience habit and realize you can feed a family of four for $20 at home versus $50 at McDonald’s, that’s a hard pattern to reverse.”
The ripple effects go way beyond burger chains. When the most price-sensitive consumers pull back from the cheapest dining option, every retailer up the chain should be paying attention.