McDonald's warns of flat earnings despite recovery

US hamburger giant McDonald's has said it expects earnings to be flat this year because of the effect of the slowing world economy and declining consumer spending.

The forecast came after the chain reported a 1% decline in third quarter earnings, despite signs its European businesses were recovering as consumers became less worried about BSE.

Worldwide net income for the three months to the end of September was $545.5m (£378.5m), compared with $548.5m (£380.6m) at the same point in 2000.

But the performance of its European restaurants improved during the quarter, led by France, which had now reported better comparable sales for each of the past seven months, said McDonald's. Germany's figures were its best results in 12 months.

European sales as a whole rose by 3% to $2.5b (£1.7b) during the quarter, although operating income still fell by 13% to $288m (£199.8m).

"Consumer concerns about the safety of the European beef supply in certain markets appear to be lessening, and we look forward to a stronger fourth quarter," said chairman and chief executive Jack Greenberg.