Macroeconomics Investopedia Provides a List of Major

Macroeconomics

Investopedia provides a list of major macroeconomic indicators, of which several are relevant to FedEx. FedEx is considered to be a bellwether organization in that its client base spans a broad swath of business. Thus, the GDP is the most important macroeconomic indicator. The amount of business being conducted in the economy will reflect in how many customers use FedEx's service. In addition, because FedEx is a premium service, businesses often reduce the degree to which they rely on FedEx in situations where they are facing cost reductions. By 2010, FedEx had restored operations to roughly pre-recession levels (Risher, 2010) and the company predicts slow economic growth going forward (Malone, 2011).

A second indicator that can provide insight into FedEx's operations is the Consumer Confidence Index. This report from the Conference Board (Barnes, 2012) has three headline figures relating to how people see the health of the U.S. economy. FedEx builds its plans around its expectations for the health of the economy going forward, and consumer confidence is generally viewed as a good forward indicator. The more optimistic that consumers are about the future, the more likely they are to spend. This spending will translate into business investment as well, as demand picks up. For FedEx, both an increase in consumer spending and an increase in business investment are good for business. Both also contribute to improvements in the GDP. FedEx can build better projections for the future of the economy in part by incorporating the CCI into its analysis.

A third macroeconomic indicator that is useful to FedEx is the Wholesale Trade Report. This report is released on a monthly basis, based on a survey of 4500 wholesale merchants in the U.S. The report indicates the current state of trade, in particular of the flow of goods. This is useful for FedEx because the company's business is built on the flow of goods. FedEx's own business can be something of a proxy for the Wholesale Trade Report. In particular, FedEx can weigh the differences between its own experience and the wholesale trade report in general to get a clearer picture of the economic situation, or simply to determine whether the company is capturing enough of the wholesale trade in general.

Overall, the best indicators for FedEx are leading and broad-based. The company's business is wide-ranging, global, wholesale, retail, consumer and corporate. Because of the broad scope of the company's business, FedEx is more highly correlated with broad measures than with narrow ones.

In addition, the company should pay more attention to leading indicators. FedEx already knows what happened yesterday, and with its close monitoring of package volume it knows what is happening today as well. The information that the company needs to leverage its operational flexibility is what package volume is going to be tomorrow. Thus, leading indicators are the most valuable. Predictions about GDP, such as those from the Congressional Budget Office, are more valuable than the past GDP figures from the BEA.

2. If the Federal Reserve raised interest rates, this would have two implications. Raising them now would be insane, of course, given the current economic conditions of slow recovery, high unemployment and low borrowing rates. It would signal a dramatic shift in monetary policy. Thus the most reasonable conclusion that can be made is that when the time comes for the Fed to increase interest rates, the economy will already be in a much stronger state of recovery than it is in currently.