I ran across a rather amusing posting by finance and business blogger Jeff Matthews, Pay Attention to FedEx, not the Fed.  Matthews states: “The most important data of the month-perhaps of the year-will be released this week. The data will provide not only the most realistic fundamental snapshot of the U.S. economy at the moment, but a view of trends around the world. The data are not, however, courtesy of the Federal Reserve or the Treasury Department. The data are courtesy of Federal Express (now FedEx, officially speaking), and consists of that company’s first fiscal quarter earnings and its outlook for the back half of this calendar year.”

Jeff, thanks for recognizing what we in the supply chain community already know, if you want to know how good or bad business really is, just note air freight volumes.

Matthews goes on to cite a statistic that the correlation of U.S. GDP to the index of air cargo activity is 70%.  A separate linking posting on Dealscape, cites a study sponsored by the International Air Cargo Association that there is a well established correlation between air cargo growth to growth in GDP. In fact, the study noted a 97% accuracy in calculating either value.

FedEx has now announced its fiscal first quarter 2010 earnings, with revenues down 20%, and operating income down a whopping 50%.  The company continued to note that revenue and profitability have been negatively impacted from the ongoing effects of the global recession.  According to FedEx CFO Alan B. Graf: “While we see signs of improvement in the economy, the year-over-year comparisons will remain very difficult for our second quarter.” CEO Frederick W. Smith indicated on a conference call that FedEx expects U.S.GDP growth to be 2.9% in 2010. U.S. Real Quarterly GDP growth last peaked in 2007 at between two and four percent.

Taking into account the stated correlations that air freight volumes can be directly linked to expected GDP growth, I eagerly dived into FedEx’s Annual Shipment Statistics FY2007-FY2010, which is made available on the company’s Investor Relations site.


A very unscientific analysis of the data shows the following two charts.


Source: FedEx data

Source: FedEx data








Here is the chart of how U.S. average daily package volumes have looked like since 2007.  In fiscal 2007 and 2008, average air package volumes were between 2.7 and 2.8 million.  As of this latest quarter, Fed Ex handled just over 2.5 million packages per day. You will also notice evidence of cyclical shipment trending, with fiscal Q3 as the peak quarter.

Source: FedEx data

Source: FedEx data








Turning to FedEx international air shipment volume, you can note that the highest daily activity occurred in fiscal 2008 and early 2009, coincidentally, after FedEx had added more international capacity to its fleet.  The latest figure of between 460 and 480 thousand daily packages is still far away from the daily peak of 500 to 520 thousand daily packages.

Supply Chain Matters and other readers can make their own conclusions, but from this data, I’d say that GDP recovery, both in the U.S. as well as internationally, still has a ways to go. Again, a very unscientific analysis, but the numbers don’t seem to reflect that economies are back to normal.

Bob Ferrari