FedEx CEO Warns ‘Global Recession’ Looming

fedex global recession
Attribution-ShareAlike 3.0 Unported (CC BY-SA 3.0) Coolcaesar 9/24/05

As if the U. S. economy wasn’t bad enough, there could be a global recession looming, just in time for the holidays. This was the warning from FedEx CEO Raj Subramaniam on Friday as stock shares of the shipping giant fell 21%, the biggest one-day plunge in its history.

The ominous warning came late on Thursday on the heels of an announcement that FedEx would fall $500 million short of its revenue target. 

Keep in mind, this is after the pandemic and after what was supposed to be the worst of the supply chain crisis.

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Not Getting Better

So what’s the reason for this? FedEx says global demand for packages has fallen, especially in the final weeks of the fiscal quarter. The company said that they do not expect the situation to improve in the near future.

CNN reports that FedEx earnings are expected to nosedive more than 40%, which would be crippling for just about any company. But what it means for the wider economy is that they expect a massive drop in shipping. 

Think of all the things end-consumers now have shipped, as opposed to in-store purchases. Or goods that are neither top capital goods or finished consumer products. Cut that down by 40% and you begin to see the picture.

FedEx CEO Raj Subramaniam appeared with CNBC’s Jim Cramer recently where he talked about some of the measures his company is taking to keep costs down. Kramer asked him, “Raj, do you think there’s going to be a world wide recession?” Subramaniam’s response, “I think so. These numbers, they don’t portend very well.”

Subramaniam continued saying, “The U.S. consumer is definitely spending less. You know the U.S. has been somewhat insulated because the U.S. dollar is the currency of choice for the world, and there’s some insulation there, but I do see the U. S. is slowing down too.”

In order to stay ahead of what may be an impending global recession, FedEx has gone into what Subramaniam calls “cost-management mode” by taking measures such as reducing flights, temporarily parking some aircraft, and cutting employee hours.

Some 90 FedEx office locations will be closed and also five corporate offices.

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Most Recent Stock Nosedive

The FedEx stock tanking followed a volatile week for U.S. stocks. After a disheartening August inflation report on Tuesday, the stock market dropped nearly 1,300 points in one day last week, the most since June of 2020.

The predictions of Dow Jones economists were not much better. The prediction had been a decline in overall inflation by 0.1%, and core inflation increasing to 0.3%. As the Fed meets this week, another 75 point interest rate hike is expected. Ironically, the latest inflation report came out and the stock market fell the day the same day the Biden administration celebrated the passage of the “Inflation Reduction Act.”

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Anticipation Of Rate Hike

As of early Monday, the Dow Jones Industrial Average was down 67 points. The S&P 500 and Nasdaq Composite were also slightly down, as all eyes are on the Federal Reserve two-day meeting beginning on Tuesday.

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Adam Crisafulli is the founder/president of Vital Knowledge Market Commentary. He said: 

“It’s a very quiet session thus far. Stocks have climbed off their lows from earlier in the morning, but sentiment is still very gloomy. The consensus playbook for the week seems to be anticipating a brief rally around the FOMC, which most people plan to use as an opportunity to book profits in preparation for further downside (a return to the June lows is thought by many to be inevitable).”

Fed Ex is not alone. Several companies saw record lows on Monday, including Charter Communications at a low not seen since March 2020, and Hasbro at a low not seen since August 2020. Drops in such disparate industries is not an encouraging sign.

Raj Subramaniam also said to Jim Cramer,“We are a reflection of everybody else’s business, especially the high-value economy in the world.”

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