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Demand for french fries reflects resilient consumer as so-called fry attachment rate holds steady

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A McDonald’s crew member prepares french fries in Miami, Florida.

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It’s a timeless question at fast-food counters: Do you want fries with that?

Responders continue answering affirmatively at a higher-than-average rate, a top potato supplier indicated. It underscores the resilience of consumer spending, even as inflation pinches pocketbooks and pandemic savings dry up.

A larger share of customers keep adding the iconic side to meal orders than in the past, according to frozen potato supplier Lamb Weston. Looking at the bigger picture, strength in the so-called fry attachment rate bolsters economic data, showing the willingness of average Americans to still shell out for everyday luxuries.

“The fry attachment rate has stayed pretty consistent,” said CEO Thomas Werner during the company’s earnings call on Thursday. “It’s been above historical levels for the past two, three years.”

This is just one example of how consumers keep purchasing despite mounting reasons to tighten purse strings, a phenomenon that’s puzzling economists.

Spending on retail and food services in America topped $700 billion in February, according to advance and adjusted government figures. That’s about 1.5% higher than the same month a year ago. And it’s a whopping 38.5% higher when compared with February 2019.

Rising wages and fiscal stimulus measures padded bank accounts during the early years of the Covid-19 crisis, prompting increased purchasing. But in more recent years, U.S. consumers have felt increasing pressure amid runaway inflation, elevated interest rates and the end of pandemic-era financial benefits.

And experts have been surprised by the unwavering propensity of Americans to use their cash, even as consumer confidence sours and fears of an economic downturn swirl. The choice to add french fries provides one case study of what some have dubbed “YOLO” or “revenge” spending, with the first term named after the acronym for “you only live once.”

Slowdown elsewhere

To be sure, there are signs of financial stress on consumers that impact monetary decisions around food. WK Kellogg CEO Gary Pilnick told CNBC earlier this year that cereal was trending as a dinner alternative while shoppers grappled with higher grocery costs.

Though customers still opt for fries, Werner said Lamb Weston’s volume took a hit nonetheless due to softer foot traffic overall in the restaurants it serves. That slide comes as consumers grow accustomed to increased prices for menu items as a result of inflation, the executive said. (Lamb Weston provides potatoes for large chains such as McDonald’s and Chick-fil-A, though Werner did not specify which companies are experiencing slowdowns.)

“On the one hand, fries remain as popular as ever with consumers,” Werner said. “But on the other hand, consumers are going out to eat less often.”

Lamb Weston on Thursday reported adjusted earnings and revenue for the fiscal third quarter that came in below estimates of analysts polled by FactSet. The Idaho-based company’s outlook for full-year performance on both financial measures also missed Wall Street forecasts.

Shares tumbled more than 19% in Thursday’s session, touching lows not seen in more than a year.

Correction: This article has been updated to remove an inaccurate reference to the timing of the Covid pandemic. This article was also updated with the correct spelling of Chick-fil-A.

Economics

Germany’s election will usher in new leadership — but might not change its economy

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Production at the VW plant in Emden.

Sina Schuldt | Picture Alliance | Getty Images

The struggling German economy has been a major talking point among critics of Chancellor Olaf Scholz’ government during the latest election campaign — but analysts warn a new leadership might not turn these tides.

As voters prepare to head to the polls, it is now all but certain that Germany will soon have a new chancellor. The Christian Democratic Union’s Friedrich Merz is the firm favorite.

Merz has not shied away from blasting Scholz’s economic policies and from linking them to the lackluster state of Europe’s largest economy. He argues that a government under his leadership would give the economy the boost it needs.

Experts speaking to CNBC were less sure.

“There is a high risk that Germany will get a refurbished economic model after the elections, but not a brand new model that makes the competition jealous,” Carsten Brzeski, global head of macro at ING, told CNBC.

The CDU/CSU economic agenda

The CDU, which on a federal level ties up with regional sister party the Christian Social Union, is running on a “typical economic conservative program,” Brzeski said.

It includes income and corporate tax cuts, fewer subsidies and less bureaucracy, changes to social benefits, deregulation, support for innovation, start-ups and artificial intelligence and boosting investment among other policies, according to CDU/CSU campaigners.

“The weak parts of the positions are that the CDU/CSU is not very precise on how it wants to increase investments in infrastructure, digitalization and education. The intention is there, but the details are not,” Brzeski said, noting that the union appears to be aiming to revive Germany’s economic model without fully overhauling it.

“It is still a reform program which pretends that change can happen without pain,” he said.

Geraldine Dany-Knedlik, head of forecasting at research institute DIW Berlin, noted that the CDU is also looking to reach gross domestic product growth of around 2% again through its fiscal and economic program called “Agenda 2030.”

But reaching such levels of economic expansion in Germany “seems unrealistic,” not just temporarily, but also in the long run, she told CNBC.

Germany’s GDP declined in both 2023 and 2024. Recent quarterly growth readings have also been teetering on the verge of a technical recession, which has so far been narrowly avoided. The German economy shrank by 0.2% in the fourth quarter, compared with the previous three-month stretch, according to the latest reading.

Europe’s largest economy faces pressure in key industries like the auto sector, issues with infrastructure like the country’s rail network and a housebuilding crisis.

Dany-Knedlik also flagged the so-called debt brake, a long-standing fiscal rule that is enshrined in Germany’s constitution, which limits the size of the structural budget deficit and how much debt the government can take on.

Whether or not the clause should be overhauled has been a big part of the fiscal debate ahead of the election. While the CDU ideally does not want to change the debt brake, Merz has said that he may be open to some reform.

“To increase growth prospects substantially without increasing debt also seems rather unlikely,” DIW’s Dany-Knedlik said, adding that, if public investments were to rise within the limits of the debt brake, significant tax increases would be unavoidable.

“Taking into account that a 2 Percent growth target is to be reached within a 4 year legislation period, the Agenda 2030 in combination with conservatives attitude towards the debt break to me reads more of a wish list than a straight forward economic growth program,” she said.

Change in German government will deliver economic success, says CEO of German employers association

Franziska Palmas, senior Europe economist at Capital Economics, sees some benefits to the plans of the CDU-CSU union, saying they would likely “be positive” for the economy, but warning that the resulting boost would be small.

“Tax cuts would support consumer spending and private investment, but weak sentiment means consumers may save a significant share of their additional after-tax income and firms may be reluctant to invest,” she told CNBC.  

Palmas nevertheless pointed out that not everyone would come away a winner from the new policies. Income tax cuts would benefit middle- and higher-income households more than those with a lower income, who would also be affected by potential reductions of social benefits.

Coalition talks ahead

Following the Sunday election, the CDU/CSU will almost certainly be left to find a coalition partner to form a majority government, with the Social Democratic Party or the Green party emerging as the likeliest candidates.

The parties will need to broker a coalition agreement outlining their joint goals, including on the economy — which could prove to be a difficult undertaking, Capital Economics’ Palmas said.

“The CDU and the SPD and Greens have significantly different economic policy positions,” she said, pointing to discrepancies over taxes and regulation. While the CDU/CSU want to reduce both items, the SPD and Greens seek to raise taxes and oppose deregulation in at least some areas, Palmas explained.

The group is nevertheless likely to hold the power in any potential negotiations as it will likely have their choice between partnering with the SPD or Greens.

“Accordingly, we suspect that the coalition agreement will include most of the CDU’s main economic proposals,” she said.

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