We tend to measure our economic conditions using government statistics, because they look really accurate. They're boring and filled with really precise-looking decimal-pointed numbers. It's easy to forget that these reports are not Census counts but surveys, and are constantly revised as more information comes in, which is a polite way of saying they're always wrong to some degree.
Fortunately there are ways of getting a better sense of the economy for those of us who want to know what's really going on in the actual world we live in. A good example of this is how many packages are being shipped by FedEx.
The Ex-men today posted a quarterly profit of more than $400 million on revenue up 11% to well north of $10 billion. But they also reduced their annual profit forecast and announced cutbacks in air freight flights as their business slows. The economic recovery is indeed weak when people and companies are not shipping as many packages.
And the Christmas rush?
"We don't anticipate a significant peak this year," CEO Fred Smith said.
His chief financial officer Alan Graf said traffic softened for FedEx Ground, FedEx Freight and FedEx Express, with the latter declining too fast to cover it with operating cost savings. "Our customers' hair is not on fire," Graf said. "They're just saying... steady as she goes."
The International Air Transport Association says more than half of the world's air freight capacity, including cargo holds of passenger jets, is going unused at the moment. And cargo traffic is down 8% at Hong Kong International, which I believe is the single busiest cargo airport in the world. But these bits of information can partly reflect a cooling off of Asian economies that are really still doing well. The FedEx information tells us more about the situation in America.
"I still think there is evidence of a recovery," Smith said, echoing statements a few days ago by his larger rival United Parcel Service. "But it's weaker than we hoped for."
Smith blamed it "largely" on "a lack of confidence that U.S. and European policymakers will effectively address current economic challenges." So once again we have a key business leader saying the business community fears U.S. and European officials will fail to fix any of these and might possibly do something to make it worse. This is worrisome coming within 24 hours of the House of Representatives failing to pass a simple stopgap spending bill, setting the stage for another ridiculous brinksmanship squabble next week as the money again runs out.
(This one was weird, too: the bill was supported by House Republican leaders but failed when the Tea Party freshmen crossed over to join Democrats in voting against it!)
Soft demand for shipping services may be softening the price of bunker fuel, that kind of oil burned in containerships. Matson today announced its second fuel surcharge cut in as many months, effective this coming Sunday. To keep this in perspective, the surcharge is still well over 40% of overall container shipping fees, which themselves have risen in the past year. But shipping is still relatively cheap for Hawaii, or else we'd be producing all our food here instead of getting most of it from the West Coast.