FDX: The Global Economy Is Rolling Over

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Global volumes declined as macroeconomic trends significantly worsened later in the quarter, both internationally and in the US – Raj Subramaniam, CEO Federal Express (FDX)

Federal Express (FDX) – an economic bellwether – issued a warning Thursday afternoon after the close that all investors should pay attention to. I consider FDX’s shipping volume to be correlated with economic activity and so when they say that volumes are rolling over it suggests to me that the global economy is as well.

How bad is it? In their press release they said that 3Q22 Express Division revenue for the quarter ended August 31 was $11.1 billion – down from $11.9 billion in the previous quarter. We’ll learn more when they report earnings next Thursday but investors aren’t waiting having sent shares down almost 25% at the open Friday.

FDX is taking significant actions to reign in costs in response to this global slowdown: Reducing flight frequencies and parking aircraft, reductions in labor hours, consolidation of certain operations, reduction of Sunday operations, cancellation of certain network capacity and other projects, deferral of staff hiring, closure of over 90 FedEx Office locations and closing five corporate offices.

Let me now step back and analyze the macroeconomic picture because several forces are conspiring to create a dangerous situation. First – as well know – the Fed is on the warpath against inflation and Tuesday morning’s hotter than expected August CPI Report has likely only furthered their resolve. Second the global economy is rolling over as all the Fed’s previous tightening is starting to take effect. As we all know: monetary policy acts with a lag. FDX is a canary in the coal mine and we are likely to hear more confirmation of slowing global growth when corporations report 3Q22 earnings in a month. The risk of a late year crash a la 2008 has increased dramatically.

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