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FedEx warns of low shipment volume, sparking recession concerns

Recessions fears are at an all time high, and with FedEx announcing a declining shipment volume pre-holidays, concerns mount.

fedex trucks behind fence

The signs of an incoming recession are sometimes hidden in places we often forget to look, and shipping slowdowns, especially pre-holiday, could qualify as one of those places. FedEx CEO, Raj Subramaniam, told CNBC that he believes that we’re headed head-first into to a worldwide recession based on what he’s seeing in the company.

Subramaniam’s dark economic prediction came after FedEx missed estimates on revenue and earnings in its first quarter. The company also withdrew its full-year guidance.

Subramaniam said weakening global shipping volumes drove FedEx’s disappointing results. He said the company thought they would see an increase in productivity after China’s factories closed for Covid and then reopened. Instead and to everyone’s surprise, demand actually fell.

The declines have been worsening weekly since June.

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The CEO warned that FedEx is a reflection of everybody else’s business. The declines the company is seeing may warn of future declines for everyone, leading to recession concerns.

“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.

Not so fast, though. The Motley Fool said it is important to note that UPS reiterated guidance for the current quarter earlier this week, which would suggest that FedEx’s internal management is not seeing a dramatic dropoff in demand.

Mark Zandi, Chief Economist of Moody Analytics, points out in the Philadelphia Inquirer that FedEx is in a highly competitive field and the decline in the company’s shipping might not be the recession sign the CEO portends.

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However, we’re definitely seeing the aftermath of inflation and we’re still suffering the fallout from the pandemic. Russia’s aggression toward Ukraine and the resulting sanctions are impacting prices, and the threat of recession is real.

Mary Beth Lee retired from teaching in Texas this year after 28 years as a student media adviser. She spends her time these days reading, writing, fighting for public education and enjoying the empty nester life in Downtown Fort Worth.

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