By Sruthi Shankar
(Reuters) -Lackluster quarterly results from consumer-facing companies including McDonald’s and Harley-Davidson are the latest sign that American shoppers are curbing spending amid shifting U.S. trade policies.
McDonald’s posted a surprise decline in quarterly global sales on Thursday and said it was navigating the “toughest of market conditions”. It echoed recent warnings from restaurant operators Domino’s Pizza, Chipotle Mexican Grill and Starbucks that Americans were spending less on dining out.
Cosmetics maker Estee Lauder forecast a bigger-than-expected drop in fiscal 2025 sales, while motorbike maker Harley-Davidson joined a spate of companies this week in pulling forecasts, citing the uncertain macroeconomic environment.
Investors have been worried that the Trump administration’s tariff plans will spur a resurgence in inflation and hurt global economic growth, in turn deterring discretionary spending.
“It’s very difficult for retailers to give solid guidance and not be conservative when they don’t know what they’re going to be able to get in terms of inventories, especially ones that come from China,” said Art Hogan, chief market strategist at B Riley Wealth.
Estee Lauder said sales in the Americas declined primarily due to a dip in “consumer confidence and sentiment”, which led to elevated inventory levels and destocking at certain retailers.
The U.S. economy contracted in the first quarter for the first time in three years, data on Wednesday showed, and consumer spending – which accounts for more than two-thirds of the economy – grew at 1.8% after a robust 4% pace in the fourth quarter.
The United States has approached China, seeking talks over Trump’s 145% tariffs, a social media account affiliated with Chinese state media said on Thursday, potentially signaling Beijing’s openness to negotiations.
Trump instituted sweeping tariffs in early April, unleashing a wave of selling across stocks worldwide and prompting several companies to either withdraw guidance or warn about their performance in the coming months.
Fast-casual chain Shake Shack posted weaker-than-expected first-quarter revenue on Thursday and said it was factoring in some level of pressure on consumer spending as well as headwinds from higher inflation this year.
However, results from card companies Mastercard and Visa signaled resilience in consumer spending.
“Visa and Mastercard data say consumers are doing fine, but reports from the likes of McDonald’s suggest that it’s still the higher-income shopper that is doing the heavy lifting,” said Brian Jacobsen, chief economist at Annex Wealth Management.
“It’s an unsustainable situation and likely to break towards a breakdown in spending without a tariff reprieve soon.”
(Reporting by Sruthi Shankar, Purvi Agarwal and Ananya Mariam Rajesh in Bengaluru; Editing by Pooja Desai)
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