CNN —
Chair Jerome Powell on Wednesday mentioned the Fed’s decision to cut interest rates was aimed at bolstering the labour market. “The labour market is in solid condition, and our intention with our policy move is to maintain this,” Powell stated. “The US economy is growing at a solid pace, inflation is decreasing. We want to keep it there. That’s our goal.”
FedEx revealed that a weaker industrial economy culminated in a “challenging” quarter, prompting them to adjust their outlook for the year. This hints at a potential slowdown in the broader economy.
The company, often regarded as a barometer for US and global economic health by investors, highlighted its concerns primarily regarding industrial customers. These customers ship goods to other businesses rather than consumers, who form the bulk of US economic activities. Conversely, CEO Rajesh Subramaniam noted the resurgence in e-commerce shipments.
FedEx, a company built on the promise of rapid package delivery, finds itself in a pinch when businesses cut costs, opting out of expedited shipping.
CFO John Dietrich remarked on the notable shift from priority to deferred shipments, although total volumes remained relatively robust.
“The soft industrial economy clearly affects the business-to-business sector,” Subramaniam explained to investors. “Shipments related to industrial production yield the highest profits for us.”
Due to this, there was “reduced demand for priority services and an increase in deferred services,” the company stated.
Investors responded by sending FedEx (FDX) shares down 14% last Friday, mainly owing to worries regarding industrial customers.
The underwhelming results came on the heels of the Federal Reserve’s unexpectedly large interest rate cut of half a percentage point, designed to boost US economic activity. Subramaniam mentioned the rate cut in his comments to analysts.
“The scale of the Fed rate cut signals the current environment’s weakness,” he remarked. “We aren’t expecting a significant recovery in industrial activity for the remainder of this calendar year.”
Subramaniam expressed cautious optimism regarding industrial production, anticipating moderate improvements by early 2025. “We have, now, set modest growth expectations due to the current environment.”
FedEx also faced other challenges, especially increased labour costs.
Before Friday’s downturn, FedEx shares were up 21% year-to-date through Thursday’s closing.
