FedEx CEO believes a worldwide recession is looming

The FedEx CEO has issued a stark warning, saying he believes a global recession is on the way after the company saw a sharp drop in shipping volume in recent months.

In an interview with CNBC on Thursday, FedEx chief executive Raj Subramaniam said “I think so” when asked if the economy “is slipping into a global recession.”

“But you know, these numbers don’t bode well,” added Subramaniam, who blamed the company’s bleak new earnings forecasts on a broader decline in economic conditions.

Shares of FedEx fell 23 percent on Friday’s opening bell, after the company said shipping demand fell sharply in late August and predicted the slowdown would worsen into the current quarter.

Shares of FedEx plunged on the opening bell on Friday after the company said the global demand slowdown accelerated in late August

FedEx shocked Wall Street on Thursday by scrapping its current fiscal year earnings forecast, which it published less than three months ago.

In response to a sharp drop in sales, the company said it will cut costs by closing more than 90 FedEx Office locations and five corporate offices, pausing new hires and operating fewer flights.

FedEx, based in Memphis, Tennessee, warned it will likely miss Wall Street’s profit target for its fiscal first quarter ending Aug. 31, and warned the company would likely weaken further in the current quarter.

“Global volumes declined as macroeconomic trends deteriorated significantly later in the quarter, both internationally and in the US,” Subramaniam said in a statement.

“We are tackling these headwinds quickly, but given the speed with which conditions are shifting, the first quarter results are below our expectations,” he added.

The warning from FedEx, which is considered a global economic factor, sent Wall Street’s major stock indices slump Friday.

FedEx shocked Wall Street on Thursday by scrapping its current fiscal year earnings forecast, which it published less than three months ago (file photo)

In addition to the gloomy mood, the World Bank said the global economy may be heading for a recession, while the International Monetary Fund said it expected a slowdown in the third quarter.

World Bank chief economist Indermit Gill told reporters on Thursday that he was concerned about “general stagflation,” a period of low growth and high inflation in the global economy.

Wall Street’s major indices were trading at a two-month low on Friday, with the S&P 500 falling 0.52 percent to 3,880.95, breaking the 3,900 level that traders considered important support.

The benchmark is now just 5.8 percent above its mid-June low as a summer rally in Wall Street continues to unravel amid fears of sharp hikes in US interest rates and a deterioration in earnings growth.

The US Federal Reserve is widely expected to implement its third consecutive 75 basis point rate hike at its policy meeting next week, after recent data showed inflation to remain stubbornly high.

Annual headline inflation fell to 8.3 percent year-on-year in August, down from a June high, but so-called core inflation rose over the month, indicating rising prices are spreading. spread throughout the economy and become more tacky.

Meanwhile, the job market appears to remain surprisingly robust, paving the way for further Fed rate hikes.

At the end of July, there were 11.2 million job openings, with two jobs for every job seeker.

A Labor Department report on Thursday showed initial claims for state unemployment benefits fell by 5,000 last week to a seasonally adjusted 213,000, in the fifth consecutive week of declining claims.

Despite the hand-wringing over a possible recession next year due to higher borrowing costs, there has been no wave of layoffs.

Economists say companies are hoarding employees after having difficulties hiring in the past year as people left staff en masse during the COVID-19 pandemic.