A major canary in the economic coal mine


For those unfamiliar with the use of a canary in a coal mine as a safety device, you can read more about it here.  The practice (now discontinued) has become an idiom for an early indicator of potentially serious or dangerous problems.

FedEx has just emerged as a major canary in the coal mine of the world’s economy.

FedEx (FDX) withdrew its full year earnings guidance and reported preliminary first quarter results that fell short of Wall Street estimates, sending shares tumbling in extended trading on Thursday.

“Global volumes declined as macroeconomic trends significantly worsened later in the quarter, both internationally and in the U.S.” FedEx CEO Raj Subramaniam warned in the release. “We are swiftly addressing these headwinds, but given the speed at which conditions shifted, first quarter results are below our expectations.”

. . .

Cost-cutting measures outlined by FedEx include reducing flights, temporarily parking aircraft, closing more than 90 FedEx office locations, and deferring hiring plans.

“We are aggressively accelerating cost reduction efforts and evaluating additional measures to enhance productivity, reduce variable costs, and implement structural cost-reduction initiatives,” Subramaniam added.

There’s more at the link.

That’s a very serious indicator of economic hard times.  Goods have to get from manufacturer to customer;  and air cargo/courier service is the preferred route to get high-value goods to their destination.  If it shows such a major slow-down, it’s pretty certain that lower-value goods and mass-market materials are also in lower demand.  The high end is an indicator of the low end, to coin a phrase.

The CEO of FedEx went further in an interview with CNBC.

FedEx CEO Raj Subramaniam told CNBC’s Jim Cramer on Thursday that he believes a recession is impending for the global economy.

. . .

The chief executive, who assumed the position earlier this year, said that weakening global shipment volumes drove FedEx’s disappointing results. While the company anticipated demand to increase after factories shuttered in China due to Covid opened back up, it actually fell, he said.

“Week over week over week, that came down,” Subramaniam said.

The chief executive also said that the loss in volume is wide-reaching, and that the company has seen weekly declines since around its investor day in June.

“We’re seeing that volume decline in every segment around the world, and so you know, we’ve just started our second quarter,” he said. “The weekly numbers are not looking so good, so we just assume at this point that the economic conditions are not really good.”

“We are a reflection of everybody else’s business, especially the high-value economy in the world,” he later added.

Again, more at the link.

We’ve spoken a lot in these pages about economic hard times.  Well, this is a really big indicator that they’re suddenly getting a lot worse.  FedEx gave its earnings guidance only a few months ago, and already it’s publicly abandoned it.  That’s a heck of a red flag to investors – and you can be sure FedEx wouldn’t have done it unless it deemed it absolutely necessary.  It’s very bad for the company’s image, and will doubtless encourage competitors with excess capacity (read:  Amazon) to try to snaffle more of FedEx’s business by discounting rates.  When there’s blood in the water, sharks are attracted, after all:  and in the courier/transport water, FedEx is one of the more widely recognized and important names.  If it’s hurting, it might become a takeover target.

I guess we’ve already said just about everything we can say about the economy.  This is merely confirmation of what we’ve seen coming for a long time.  Stock up on essentials, get rid of debt as far as possible, and batten down the hatches.  It’s going to be a rough ride.



  1. I wonder how much if their business is the gun industry or if the recent moves to limit gun related shipments (under presser, but still) hurt the bottom line.

    I am really curious, though I imagine any affect won't be seen/reported for a few more weeks and much will be hidden by Christmas

  2. Amazon used to ship a majority of their products into this area via FEDEX, but that changed about 6 months ago to where Amazon packages were coming almost exclusively via UPS with a small volume USPS. If Amazon made that change all over the country that would take some volume out of FEDEX. Due to lack of supply for many items usually shipped companies to conduct day to day business that would also decrease shipping volumes. Add to that the general slow down of the economy and people cutting back on nonessential spending due to increased cost of essentials like food & energy and more pressure across the entire shipping industry.

    Just another sign of the times, but don't worry it will only get worse from here.

  3. I do think the CEO's dire warnings about the global economy should be regarded in the context of the source. FedEx has been badly managed for the last several years. The CEO owns a great deal of the current problem. I'm pretty sure that while UPS will show a decline, it won't be a disaster like the one FedEx disclosed yesterday.

    That said I am no Pollyanna on the state of the economy.

  4. I think the wording a bit strange; it is as if an 'impending recession' is the excuse for poor performance. It is become a scapegoat.

    Consider how can it be that an impending event, i.e., of the future, be the cause of events in the present.

    Indeed, it is the poor performance under the likes of Raj Subhuman which precipitate that future he predicts. How wonderfully arcane that he can predict the nature of coming events yet was put in irons by seeming unoredictable 'headwinds'. Egads!

  5. FEDEX service in this area of the mountains of NC has been up and down for the 6 years we have lived here depending upon who the delivery driver was. We have had good and bad and ugly. FEDEX as a driver told me is broken up into two divisions, one for FEDEX standard home delivery is farmed out to subcontractors and then there is standard FEDEX with direct company employees. The contracted workers do not get the benefits and pay level of FEDEX direct employees so the turnover rate is high. UPS has until recently had superior service.

    In the past 6 months FEDEX has actually excelled in service while UPS has dropped to sub par. We live in a relatively remote area in the mountains of NC. The other day I actually got a phone call ahead of a FEDEX delivery with the driver telling me he was 20-30 minutes out. I was at a doctor's appointment and would not make it back in time to unlock the gate to our property and it was raining. It is then three tenths of a mile from our gate to our house. The driver texted me back and said he had plastic bags he could wrap the package sin and leave them at the gate if that was acceptable. I texted him back it was fine with me. UPS however has recently dropping packages by the side of the road next to peoples mailboxes. Our mail box is one mile from our property's gate back up a gravel road.

    To address the CEO of FEDEX's statement I can only say I was the COO of a manufacturing company in the Piedmont area of NC in 2008 as things went south. One day we were on a record pace and then things started to turn. When you have no control over the events all you can do is react to them. As things begin to unravel you can predict/guess how bad things may become. We laid off out third shift, reduced staffing on our 1st and 2nd and then went to 32 hour work weeks to keep our core staff employed. The German ownership panicked and wanted to shed ownership. My partner and I jumped at the opportunity to refinance at the right time to rebuild.

    I find it hard to criticize the management of a company unless I am in their shoes and have access to the information they have available. Criticize him if you will but tough times are coming. You may think you are prepared for what is about to unfold. My gut and my dreams tell me none of us are close to being prepared enough. May God have mercy on the faithful.

  6. Read an article in the South China Morning Post yesterday or day before about West Coast container prices out of the port of Ningbo having begun to fall in the past week or so.

    Whether that was due to pricing in rail strike then on the cards or general lack of demand, I don't know.

    What I do know is that during the last 8-10 days as a typhoon wandered in out of the Pacific towards the coast and then wandered up it in the general direction of Shanghai — and typhoons invariably cause inversion layers which trap all the gunk in surrounding areas outside the immediate storm — is that the air pollution here in Hong Kong has been shockingly bad –> the Pearl River Delta is running more or less normally at capacity churning out product.

  7. Why is the President of Fedex another @#$%ing South Indian Brahmin?

    It's far beyond a joke at this point.

    Galling to be a subject second-class citizen in your own land.

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