FedEx has just downgraded its quarterly earnings forecast for the second time because of concerns about the global economy. The shipping company’s troubles are primarily overseas. As Europe has teetered into recession, Asian economies that produce for Europe have also faltered.
Hong Kong economist Andy Xie says China’s manufacturing centers have become a major hub for global air freight. “A lot of things are shipped from Korea, Taiwan and Japan to China,” he says, “and products like iPhones are distributed to the world.”
Now, Europeans aren’t buying as many of those fancy electronics, says Fariborz Ghadar, a professor of international trade at Penn State. And some of the business and finance that’s conducted via FedEx envelopes has fallen off as well. Says Ghadar, “Immediately, you think of documents going back and forth. But FedEx delivers components. If the equipment is not being used in Europe, then the components are not necessary. Everything slows down.”
The domestic U.S. economy could be FedEx’s one bright spot, though, with the holiday shopping and shipping season about to start.