Wall Street analysts are scaling back their growth expectations for the largest U.S. companies; an early warning sign the country is hovering on the edge of a recession, reports the Financial Times.
They predict the revenue of leading U.S. blue chip companies will rise at an annual rate of 1%-to-1.5% during the third quarter of 2012, which is below the current inflation rate, down from a previous forecast of 4%-to-6% and the lowest levels predicted since 2008 and 2009.
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McDonalds—one of the leading 30 companies in the Dow Jones Industrial Average—reported lower profits and slowing sales this morning. Its net income fell 4% in the second quarter as a result of the strong U.S. dollar and increasingly budget-conscious consumers.
Suggesting more challenges ahead, the Oak Brook, Ill.-based company also admitted a key sales figure slowed in July; it seems affordability and exciting menu item launches haven’t quite helped McDonalds pull through 2012 and attract investors.
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CEO Don Thompson says investments in renovating restaurants should continue to attract customers, with sales at new restaurants in the U.S. rising 3.6% in Q2. New specialty drinks are contributing to this growth across the globe.
Instead of investing in blue chip companies, however, investors have been piling funds into dividend-paying companies seen as safe havens due to the unending eurozone crisis and a weakening U.S. outlook.
“Current estimates are unambiguously pointing to the risk of an American and global recession later in 2012 and into 2013,” Nicholas Colas, chief market strategist at ConvergEx Group, told Financial Times.