I’ve written before here about what I call the “FedEx Indicator”—i.e., what package delivery traffic can tell us about the direction of the economy. The FedEx indicator has been flashing yellow for months, with FedEx dropping plane fights and delaying new airplane purchases.
Well now FedEx’s chief rival, UPS, is flashing the same warning signal, as reported this morning in the Wall Street Journal:
United Parcel Service reported tepid growth for the second quarter and reduced its profit forecast for the full year, saying customer confidence has been rattled by the European debt crisis and the U.S. “fiscal cliff” looming early next year.
The Atlanta-based shipping giant also continued to wrestle with soft demand for exports from Asia, and its U.S. domestic volume growth was fueled primarily by relatively low-value e-commerce shipments, which crimped revenue. . .
The company said it is planning another 10% reduction in its air capacity out of Asia after cutting the network by a similar amount in October because of steeper-than-expected declines in exports from the region to the U.S. and Europe. Asian exports to the U.S. and Europe slumped by a double-digit percentage basis in the second quarter.
Meanwhile, another story this morning caught my eye. As we’ve all heard, this summer’s hot weather and drought conditions have hammered the corn crop. The Journal reports this morning that leading meat packer Smithfield Foods is importing corn from Brazil. (The story suggests that Tyson Foods is probably doing the same thing.) An American food company needing to import corn to meet its needs is like Saudi Arabia needing to import oil. Of course, maybe if we weren’t diverting roughly half our corn crop to make ethanol we wouldn’t see shortages and high prices, even with a drought.
I wonder, by the way, whether we’re getting shipped our Amazon-grown corn by . . . Amazon.com?