over 1 year ago • 3 mins
Delivery giant FedEx gave a profit warning on Friday after woeful quarterly results.
What does this mean?
FedEx wasn’t due to report its quarterly results until later this week, but it looks like it wanted to rip off the band-aid: the delivery giant blurted out that spluttering demand across Asia and Europe stunted the amount of goods it shipped. And business can hardly have boomed in the US either: separate data showed the number of shipping containers arriving into Los Angeles – the country’s busiest port – dipped last month by the most since the early days of the pandemic.
Those worldwide trends really did a number on FedEx: the delivery giant’s profit from last quarter came in well below analysts’ expectations, and it said things are unlikely to pick up anytime soon since demand’s only going south. That forced FedEx to scrap its annual earnings forecast – one that was only freshly set in June.
Why should I care?
Zooming in: Big plans, big backlash.
FedEx has big plans to – here’s a novel twist – cut costs and boost productivity, including shuttering nearly 100 offices, parking aircrafts, shunning projects, and slimming hiring and workers’ hours. Unsurprisingly, investors weren’t best pleased: they pushed FedEx’s stock to its biggest one-day drop since it listed over 40 years ago, shaving around $11 billion off the company’s market value.
For markets: An unwanted delivery.
Your new scarf arriving late is the least of your worries: FedEx is considered an economic bellwether, since the success of its sprawling deliveries can hint at the state of the global economy. That might be why shares of other players in the commerce space – including Amazon and FedEx’s rival UPS – slipped after the news, while fears of wider knock-on effects meant the S&P 500 and Nasdaq fell far enough to put US stock indexes on course to finish this week in a slump.
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Data released on Friday provided a glimmer of hope for the Chinese economy.
What does this mean?
China’s economic reports have read like British weather forecasts lately, with little sunshine and non-stop rainy days. But at long last, here comes a bright spell: Chinese retail sales – a telling metric in the world’s biggest consumer market – were up 5.4% in August versus the same time last year, well above the 3.5% that economists had predicted. What’s more, overall industrial production (things like factory output) managed to grow 4.2% last month, despite dips in major categories like cement and steel.
Still, China’s good news came with some caveats. For one, the government’s been subsidizing electric vehicles by halving the tax on new passenger cars, and those handouts have been behind much of the country’s boosted sales and production. And for another, industrial output was spurred on by a jolt in electricity production during the summer’s heatwave – and that’s unlikely to continue for long.
Why should I care?
Zooming in: Real estate recession.
Despite the somewhat reassuring figures, China’s domestic demand is still pretty feeble. That’s especially obvious in the country’s all-important property market: Chinese developer Country Garden said last month that real estate had “slid rapidly into severe depression”. And that wasn’t an exaggeration: the Chinese property market has experienced more contractions than an entire labor ward lately, with separate data showing home prices have now declined every month for the past year.
The bigger picture: Touch-and-go growth.
The Chinese government’s been upping its game in a bid to spur growth, spending freely on infrastructure and cutting key interest rates. It’s likely to keep that up too, which might be why Bank of America economists still believe China’s economy could grow 3.5% this year – even as the country sticks to its industry-shrinking zero-Covid strategy and prepares to tackle a situation that many have called more daunting than 2020.
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