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Earlier today, FedEx reported weak guidance on slowing global growth. Its stock ended down about 3%, and the transport stocks were generally big laggards.Because FedEx is considered to be such a bellweather for economic activity, its earnings are closely watched by a broad range of folks, not just FedEx investors.
First is his comment about the global economic situation: global trade is in a very rare position of growing slower than GDP:
…fundamentally, what’s happening is that exports around the world have contracted, and the policy choices in Europe and the United States and China are having an effect on global trade. Global trade has grown faster than GDP, except for the 2000, 2001 meltdown and 2008 and 2009, for 25 years. And over the last few months, that has not been the case. So that’s what’s really going on, is that exports and trade have gone down at a faster rate than GDP has.
Smith also takes a shot at the Fed:
Well, let me elaborate on what I said just a moment ago. I mean, systemically, the policy choices that have been made in Europe and the United States and China are having effect on world trade. The episodial product launches that you refer to, we’ve been talking about for 2 years. And we are carrying a huge amount of that traffic, but it is episodial. At the same time that you have that going on, you have a declining value per pound. In a lot of electronic equipment, you have fuel going up, partially in response to the quantitative easing. I mean, as the Fed puts more money out there, people put more money into commodities and drive the price up. So you have products that are getting lower in value per pound, which is the key correlation for goods being moved by air. And so they’re going on the water to an improved container liner system that’s been developed over the last few years. So you’ve got a lot of things that are going on there, and the product launch of Apple’s and Microsoft is not going to provide the type of sustained growth in the international trade that the world has seen historically. So when that turns back around I think is directly related to the economic macro system in Europe, North America and particularly in China.
Then later he hits on a very specific point about China:
…I can tell you this on China. The locomotive that has driven China’s growth is its export industries. And with the situation in Europe and, to a lesser degree, in North America, that is a significant issue for the Chinese economy. Now the consumer consumption in China is not increasing at a significant rate contrary to everybody’s hopes. While exports from, say, the United States into China have grown, they are dwarfed by the exports from China into the United States. And as the big economies in Europe and the U.S. have grown or contracted — grown at a far lesser rate or, in the case of certain European countries, have contracted, that’s reflected in the numbers in China. And you can’t escape that. I’ve been somewhat amused watching some of the China observers, I think, completely underestimate the effects of the slower exports on the overall China economy.”
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