‘Clearly what IMF had characterized as a global economic slowdown has only intensified in recent weeks and months’
By Kiran N. Kumar
On Friday, Sep 16, the US market sent out signals of an imminent economic slowdown with FedEx Corp registering a sharp drop in package deliveries, its shares suffering a loss of 21%, its biggest percentage drop ever.
The shares plunging faster than ever, close to a similar downturn witnessed in Facebook parent Meta, General Electric and Verizon Communications point to an inevitable worry among investors with an inevitable cascading effect that may erode hundreds of millions of dollars from the markets.
Read: Recession 2022: Will it be different from 2008? (August 6, 2022)
The shrinking volumes of shipping deliveries by FedEx and its rival United Parcel Service Inc have confronted lower volumes of packages this year, indicating not merely the supply chain impediments but a broader downtrend in consumer confidence.
The declining volumes of FedEx speak volumes about the big retailers pulling back on orders and impacting shipments. Overall, the major US stock indexes fell sharply on Friday — the S&P 500 declined 4.8% and the Dow Jones Industrial Average dropped 4.1%.
At the macro level, the Gross Domestic Product (GDP) fell 0.9% in the second quarter and 1.6 percent in the first three months of 2022. The US Federal Reserve has been relentless in raising interest rates to combat inflation that has been looming large since the pandemic began.
Ironic but China, the other biggest economy, is also facing similar signs of an economic slowdown with declining housing prices and consumer spending.
The world’s two biggest economies, locked in an interdependent global economy, have been slowing for sure to affect the rest of the world.
China is focusing on infrastructure to pick up momentum in public spending and widening the labor market, but the US is finding itself in a tricky situation with its hands tied to stem inflation first and address the declining consumer confidence later.
Close on the heels, both International Monetary Fund (IMF) and the World Bank have warned that the global economy is in its steepest slowdown since 1970.
The World Bank said the world’s three largest economies — the US, China and the eurozone have been slowing sharply and even a moderate hit over the next year could tip the global economy into recession.
The IMF, which in July revised down global growth to 3.2% in 2022 and 2.9% in 2023, is likely to release its new outlook next month listing some countries slipping into recession next year, though it maintained that it is too early to predict a widespread global recession.
“Clearly what we had characterized as a global economic slowdown has only intensified in recent weeks and months,” IMF spokesman Gerry Rice said last week in a press briefing.
China’s troubles with a continuing Covid-19 lockdown and real estate issues and an appreciating dollar will have adverse implications for many countries, he noted.
Read: Signs Of Economic Slowdown Have Begun To Emerge (February 7, 2022)
While many experts insist that the US may not be technically in recession, the IMF is unequivocal in its report that the recession is enveloping a larger number of people around the world.
“Whatever you want to call it, it’s a horrendous situation for those people,” says Rice.