Due to the economic slowdown in China, a ripple effect has been felt across several global economies in which several American companies do their business. Due to this weakening of the global economy as a whole, the U.S. dollar has in turn strengthened relative to the European Euro and the Great Britain Pound. While many American consumers think that a stronger U.S. dollar is better for the U.S. economy due to cheaper traveling options, that is not entirely true. A stronger U.S. dollar can sometimes prove fatal to many companies due to the fact that foreign buyers can no longer afford their products.
This as proven to be just the case for FedEx, a massive American package shipping company. In the last 3 months alone, FedEx's export revenue decreased 7% and the number of packages it ships international priority has also decreased by 5%, with their stock also failing over 3% on Wednesday, September 16th. With China still recovering, how much will the global economy truly be hurt? Are we headed for a global economic depression?
7 comments:
This global economic environment has to be interesting for the wealth management industry. A number of hot investments in recent years are now turning down. Hopefully the great number of boomers about to retire have selected good managers who can avoid these losses.
It is true that when the U.S. dollar appreciates, the demand for U.S. good and the ability to export decreases. Also, potential U.S. manufacturing may be disrupted due to this change. In order to maintain it's role as the world's largest manufacturer, the U.S. needs to weaken the dollar to decrease the trade deficit.
This is an interesting article! I didn't know the dollar was almost as strong as the Euro and the Pound. That's great news for the global economy, and the United States. It provides more buying power, which could only mean more spending.
I honestly don't think we're headed toward a global economic depression. Too many countries are doing too well economically (see: US, Germany) to have such a slump. I understand Greece is a much smaller and, well, less important country than China, but that major economic downturn didn't affect Europe as badly as predicted.
Though China is a major economic power, is it possible we're overestimating its actual power?
We should all take a trip to Europe apparently. The dollar has gained 5% versus the Euro just since the beginning of the year and that's impressive within itself because the euro and pound have been major sources of currency for centuries now. It's amazing how one country can impact all the others. In the 1920's it was America that crashed and the great depression ensued pulling all the other countries down with it. But now it's China in the lead and hopefully we won't run into another economic depression.
And Seeing as how even with China's downfall American companies are still able to function relatively well, we won't be headed towards another depression! We'll just have to hope America can remain on top.
I would be interested to see how their domestic shipping component has performed in the same time period. Although FedEx is exporting less because of the recently strong dollar, I would expect them to also be experiencing increased domestic shipping because consumers will be buying domestically. Also, consumers should potentially be buying more products abroad which should in turn be brought to the U.S. and shipped by FedEx and other trucking companies.
I also did not realize that the dollar had appreciated that much since the beginning of the year. I find it interesting that international shipping, it seems, is one of the first institutions to feel the slowdown of the global economy as opposed to other businesses who rely on foreign investment. While I don't believe that we will see a global economic depression anytime soon, I think that companies will begin to feel more economic strain if the US dollar further appreciates.
Although strengthening of the dollar is a great news for a lot of people, it might actually hurt foreign trades in general. International customers of US products will not be able to buy as much of US products due to their weaker currencies compared to the US dollar, but would be willing to sell theirs to the US in turn. This might reduce US exports again compared to US imports, thereby widening the deficit.
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