Prices are going down at stores like McDonald’s Corp., in commodity markets, and for durable goods, which is a sign of downward trends, according to Yardeni Research.
The number of Big Macs bought at McDonald’s has dropped around the world, according to a note from July 29 from Yardeni, a financial and economic research company. The big fast-food chain MCD -0.63% just reported “its first worldwide sales decline in 13 quarters.” At the same time, the note says, it is expanding its “$5 meal deal.”
After a big rise during the COVID-19 pandemic, inflation has slowed down a lot. This has made investors think that the Federal Reserve might start cutting interest rates as soon as September. The Federal Reserve’s current strategy of high interest rates is meant to lower inflation by slowing down the economy. Yardeni says there are signs that consumer demand has slowed down.
Yardeni said that in order to boost sales, “Target TGT -2.13%, Walmart WMT 0.76%, and Aldi have lowered prices on food and other household staples.”
The company also said that Amazon (AMZN -1.09%), Walgreens, and Best Buy (BBY -1.92%) had announced price cuts. It also said that Burger King and KFC had both added $5 meal options, just like McDonald’s.
Because of this, Yardeni said, retailers and their suppliers will have to work even harder to find new ways to use technology to cut costs and boost output.
The company said that price drops in commodity markets, such as those for metals, energy, and crops, were also proof of recent deflationary trends.
As of late, Yardeni said, “both the price of copper HG00 -1.90% and crude oil CL00 -1.04% have been weak.” “They are both very sensitive signs of growth in the world economy.”
In its note, the company also talked about “falling grain prices” as a commodity that should help restaurants “deal with the deflationary pressures on their prices to consumers.”
The chart below shows what Yardeni saw: “lots of deflation in U.S. consumer durable goods prices.”
Yardeni said, “China is cutting the prices of more durable goods and consumer appliances that it sends around the world in order to boost sales.”
The firm’s note also says that regional business polls done by the Fed’s district banks in July show that the U.S. “goods economy has been in a growth recession since early 2022.”
This week, the Federal Reserve is having a two-day policy meeting. On Wednesday, the Fed is likely to decide where it will hold interest rates.
Tuesday morning, the U.S. stock market was mostly going down, and Treasury yields hadn’t changed much.
At the last check, FactSet data showed that the S&P 500 SPX -0.96% was down 0.1% in morning trade, the Nasdaq Composite COMP -1.41% was down 0.5%, and the Dow Jones Industrial Average DJIA -1.22% was up 0.3%.
The 10-year Treasury note yield TMUBMUSD10Y 3.995% stayed about the same at around 4.18% on Tuesday morning, while the two-year Treasury yield TMUBMUSD02Y 4.200% went down by about one basis point to around 4.38%.
