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FedEx says economy stalling, cuts outlook

FedEx Corp. said Tuesday, Sept. 18, 2012, that

FedEx Corp. said Tuesday, Sept. 18, 2012, that the global economy is worsening and it's cutting its forecast for the fiscal year ending next May. The company's express division is being most affected as business slows down globally. This truck is in San Francisco. Photo Credit: Getty Images, 2008

FedEx Corp., considered an economic bellwether, says the global economy is stalling, and it's going to get worse next year.

The conditions are shrinking earnings at the world's second-largest package delivery company. Factories are making fewer items for FedEx to ship, and customers are opting for cheaper delivery options to save money.

FedEx Tuesday cut its outlook for global growth and industrial production while slashing the forecast for company earnings. And CEO Fred Smith suggested trade has slowed to levels seen in the last two significant economic downturns.

It's more evidence the global economy has a way to go to a full recovery. Several countries in Europe are in recession and the United States is struggling with high unemployment and weaker manufacturing growth.

And Smith said some experts have underestimated the severity of the slowdown in exports from China, where FedEx has invested heavily over the last several years, adding new planes to export goods and expanding its hubs and network.

FedEx's forecasts are closely watched for signals of future economic health. Its results provide insight into the global economy because of the number of products it ships and the number of countries in which it does business. Bigger rival UPS said in July that it expects the global economy to get worse before it gets better. UPS also cut its earnings forecast. The current recovery in the United States is the slowest since World War II.

FedEx lowered its expectations for U.S. economic growth to 2.2 percent in 2012 and 1.9 percent next year. The Memphis, Tenn., company also cut its earnings forecast for the fiscal year ending in May to between $6.20 and $6.60 per share, from $6.90 to $7.40 previously. -- AP

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