Rabobank No Longer Forecasts US Recession this Year, but Some Food Segments are Already Feeling a Pinch
Recent trade deals struck by the Trump administration suggest that a less-severe trade war scenario is taking place. While new trade disruptions could occur in the coming months, the current scenario points to a smaller rebound in the US inflation rate and less damage to US economic growth and economic activity than we assumed earlier. We are no longer expecting a US recession this year. US Gross Domestic Product growth is expected to be only modestly negative in Q3. GDP growth is forecast to be back in modestly positive territory by Q4. We do not expect significant deterioration in employment growth or increase in the unemployment rate in the US economy.
Consumer Price Index Inflation Continues to Rise
We do expect CPI inflation to continue to rise and peak at 4.0% by the end of the year due to price increases in the basket of goods tracked in the CPI. While the recent, higher than expected Producer Price Index (PPI) print has slightly lowered the market’s forecast of a September interest rate cut by the Federal Reserve Bank, we still think that a 25 basis point interest rate cut next month is likely, and that interest rate cuts will accelerate in 2026, as President Trump’s influence on the Federal Reserve increases. However, this will not necessarily translate into longer term US interest rates declining. Our baseline expectations for Canada and Mexico has their central banks cutting policy rates by another 25 basis points this year.
Consumer Confidence Rebounds but Still Low
The consumer confidence index dropped to historical lows in Q2 as cost of living concerns over higher prices combined with reports of layoffs and fears about the unemployment rate but has rebounded in recent months. Still, consumer confidence remains well below the levels seen in late 2024. While the 2025 consumer price inflation rate has been more generally tame than some had expected, the higher inflation rate since 2021 continues to have an impact on purchasing power and consumer food choices, and is especially impacting foodservice. Through June 2025, US foodservice traffic has declined for nine consecutive quarters, as foodservice inflation has proven to be much stickier to the upside than food prices at retail grocery stores.
Quick-Service Restaurants a Mixed Bag
The exception has been in quick-service restaurants (QSRs) focused on either chicken products or snacks and beverages, which continue to show traffic growth. Other QSRs and fast casual restaurants have seen a traffic downturn.
QSRs are typically considered the most affordable option for dining out and have historically been viewed by economists as countercyclical. However, the past quarter showed they were directly affected by declining discretionary income and purchasing power among lower-tax-bracket demographics, without successfully capturing the downshift from higher price foodservice categories. As trade war uncertainties ease and industry players refine their offerings to be more affordable and differentiated, consumers may begin to re-engage with foodservice more actively in the quarters ahead.
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