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Summary:

You and I don’t need to see charts to figure out that our economy is in deep trouble. Nevertheless, here are two that show that we are facing some headwinds, the impact of which will be felt in the tech economy as well.

recession

You and I don’t need to see charts to figure out that our economy is in deep trouble. Nevertheless, here are two that show that we are facing some headwinds and the impact of that is going to be felt in the tech economy as well. In a note to their clients this morning, Macquarie Capital’s research group pointed out:

Demand for power generation in the US (Y/Y growth in demand, excluding weather-related usage) has historically tracked closely with GDP growth and declines over the past several months suggest that GDP growth will remain muted, at least over the near term.

Similarly,

FedEx and UPS shipment trends represent another indicator of consumer purchasing behavior. Shipping volume fell off dramatically in both shippers’ largest segments during the last downturn in ’08-’09 (with a more rapid and deeper impact at FDX); domestic express volume growth turned negative at FedEx in the firm’s fiscal fourth quarter ’11 (ended April ’11) and continued to decelerate through the August quarter.

More importantly, FedEx cited a more cautious outlook for volume trends through the holiday season and into early 2012. Underpinning the weakening volume trends is a slowdown in consumer demand, particularly related to consumer electronics items manufactured in Asia and shipped to U.S. consumers. FedEx CEO Fred Smith’s quote from the call (on this year’s holiday shipping season): “We don’t anticipate a significant peak this year.”

FedEx/UPS data portends bad news in particular for e-commerce companies, which in turn can have reverberations through the rest of the tech ecosystem.

  1. Looks like it will pick up in Q4

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  2. Interesting charts, but the power demand should include the actual historical gdp trend line for comparison.

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  3. Incomplete post. Both are ‘coincident’ indicators and give a snapshot of current economic activity (not leading or lagging). Both FedEx and UPS had record Q3/Q4 2010 activity from an especially strong Christmas, so trending downward for a quarter or two is not alarming. Both companies expecting tempered growth toward the end of this year, which is not demonstrated, nor can it be extrapolated in your graph. A decline in power demand is also not alarming for seasonal factors, temps getting cooler (normally happens in the fall) and summer driving season is over. This post is unnecessarily alarmist. Just don’t agree.

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  4. Alexander Ainslie Monday, October 10, 2011

    There is a 3rd and very reliable indicator: bulk cement flows down significantly.

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  5. John Kneeland Monday, October 10, 2011

    We should obviously borrow more money from China and spend it.

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    1. I get the feeling you might be kidding, but seeing how China doesn’t hold us accountable for our deficit (budget and trade) ways by devaluing the dollar, we should keep doing what you suggest. If they’re not going to penalize us for over-consuming, and they make it impossible for us to compete, then let’s keep on taking their cheap loans.

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    2. KenG
      We still have yet to pay China for the Iraqi war, remember they financed it as it was kept “Off budget”. I don’t think China will be in much of a mood to lend us more.
      Further, does this mean Wall street needs another bailout? This time it may be a tad more difficult to push through given that Wall Street is “Occupied”
      BTW, Om, why no coverage of the Wall Street protests? I think it’s a big story kind of Vietnam protests meet Facebook and Ipad, I am sure there is an interesting tech angle there. They’ve appeared on Dailyshow so it must be mainstream!

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  6. May more digital (software) shipping than hard goods? Of course if there’s a lot of digital spend via ads to promote hard goods, then the economy is really in a mess.

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  7. These are coincident indicators, not predictive. We know that the economy has been slow. Every CEO on their earnings call for the quarter will cut their outlook. They don’t get any credit for being bullish. All eyes are on Europe. See http://blog.contracarbon.com , “A Brief Look at the World…”

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