Why higher demand for sausage might be the latest sign the US economy is slowing

• A manufacturer said in a survey by the Dallas Fed that its seen "modest growth" in its sausage category.
• Greater demand for sausage could signal that US households are aiming to save more on food costs.
• Its one of several products said to be correlated with economic downturn.

Americans replacing steaks with sausage on their shopping list could be a sign that the economy is slowing down.

The Dallas Federal Reserve's Texas Manufacturing Outlook Survey, released Monday, shared comments from one food manufacturer that said its seen "modest growth" in its dinner sausage category.

The manufacturer added that greater demand for sausage often signals a slowing economy. As US households work to save on groceries, they often look to sausage as a cheaper alternative to beef or chicken.

"This category tends to grow when the economy weakens, as sausage is a good protein substitute for higher-priced proteins and can 'stretch' consumers' food budgets," the producer said.

Grocery prices have skyrocketed in the post-COVID era of high inflation. A Wall Street Journal report in February showed that in 2022, Americans spent 11.3% of their disposable income on food, marking the largest portion of their budgets used on groceries since 1991.

With inflation straining consumers' wallets, Americans are increasingly focusing on value, according to recent earnings reports from some of the largest consumer-facing companies including McDonald's and Amazon.

In its July earnings call, McDonald's executives said lower income customers are turning away from eating out amid high prices, leading the fast food giant to focus on its $5 value meal. Meanwhile, Amazon executives said deal-hunting shoppers have hurt its sales.

Sausage isn't the only under-the-radar recession indicator out there.

The ebb and flow of demand for other products, such as lipstick, underwear, and cardboard boxes, can also be a gauge of general economic health.

Inflation has come down sharply since peaking in the summer of 2022, falling to 2.9% in July. It marked the first time inflation was below 3% since March 2021.

The Federal Reserve continues to target a 2% inflation rate, and will likely cut interest rates in September, offering some relief. Investors are pricing in a 25 basis point cut, with smaller odds for a 50 basis point cut.