Kellie Maske, Sr. Economics Fellow FedEx Corporate Economics
U.S. Outlook: Moderate Growth Overall 6 4 US Real GDP Growth 2 % Change 0 (2) (4) Forecast (6) (8) Bars = QOQ% Annualized Line = YOY% (10) 2005 2006 2007 2008 2009 2010 2011 2012 Source: BEA, FedEx Corporate Economics 2
Inventories Generally Lean, Especially at the Retail Level 1.700 1.650 1.600 1.550 1.500 1.450 1.400 1.350 1.300 1.250 1.200 Real Inventory/Sales Ratio: Retail Real Inventory/Sales Ratio: Total Business 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: U.S. Census Bureau 3
Corporate Balance Sheets Healthy, Enabling Firms to Continue to Invest in Equipment and Software 1900 1700 1500 1300 1100 900 Corporate Profits SAAR, Bil$ 1150 1100 1050 1000 950 900 700 Real Investment: Equipment & Software SAAR, Bil. Chn. 2005$ 500 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: U.S. BEA 850 800 4
Exports Have Been a Bright Spot 110000 100000 US Goods Exports SA, Mil. Chn. 2005$ 115 110 30000 Advanced Technology Imports SA, Mil US$ 105 90000 100 25000 80000 95 70000 90 20000 60000 50000 2000 2002 2004 2006 2008 2010 Source: U.S. Census, Federal Reserve Board Trade Weighted Dollar Jan 97=100 85 80 75 15000 10000 2000 2002 2004 2006 2008 2010 Source: U.S. Census, Haver Analytics Advanced Technology Exports SA, Mil US$ 5
Consumers Still Spending Despite Weak Sentiment 9500 U.S. Real Consumer Spending 9400 9300 Bil. Chn. 2005 US$, SAAR 9200 9100 9000 8900 8800 Source: U.S. BEA 2006 2007 2008 2009 2010 2011 6
U.S. Households Continue to Deleverage 7
If Businesses Continue to Invest, History Reassures that Jobs Will Follow YoY % Change 25 20 15 10 5 0 (5) (10) (15) (20) (25) Source: BEA & BLS Business Investment & Jobs Creation 200 250 300 350 400 450 500 550 600 650 1985 1990 1995 2000 2005 2010 Real Private Non-Residential Investment Initial Jobless Claims (Inverse Scale) Thousands % Growth 10 8 6 4 2 0 (2) Business Productivity Output Per Hour (4) Q1:03 Q1:05 Q1:07 Q1:09 Q1:11 QoQ SAAR of Growth Source: Bureau of Economic Analysis YoY Rate of Growth 8
Still Plenty of Pent-up Demand for Durable Goods 21.5 Light Vehicle Sales, SAAR, Mil. Units 19.5 17.5 Cash for Clunkers 15.5 13.5 Scrap Rate = 12 Million Units per Year 11.5 9.5 7.5 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: U.S. BEA 9
For Housing Cyclical Factors Continue to Trump Long Run Fundamentals 3.0 2.5 Housing Starts Seasonally Adjusted Annualized Rate 25 20 Total Real Estate Assets Real Estate Equity Home Mortgage Debt Millions 2.0 1.5 Trillions 15 1.0 10 0.5 U.S. Housing Starts Average 1960 to Present 0.0 Jan-60 Jan-70 Jan-80 Jan-90 Jan-00 Jan-10 Source: Census 5 0 Q1:85 Q1:90 Q1:95 Q1:00 Q1:05 Q1:10 Source: Federal Reserve Board 10
Global Outlook A Two-Speed World Led by Emerging Countries 12 10 8 Global Real GDP Growth Forecast Real GDP Growth % 6 4 2 0 (2) (4) (6) World GDP Emerging Markets Developed Countries 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: Economist Intelligence Unit, FedEx Corporate Economics 11
V-Shaped Disaster Recovery in Japan 100 Industrial Production (2005=100) 150 Export Volume (2005=100) 90 130 80 110 70 2009 2010 2011 90 2009 2010 2011 Source: Ministry of Economy, Trade and Industry Source: CPB Netherlands Bureau for Economic Policy Analysis 12
Positive Growth in EU, Despite Debt Crisis 5.0 3.0 Eurozone Germany Real GDP Growth YOY% 1.0-1.0-3.0-5.0-7.0 2005 2006 2007 2008 2009 2010 2011 Source: Eurostat, Deutsche Bundesbank 13
Global Trade Growth Decelerating After Record Growth in 2010 170 165 World Trade Volume Index, 2000=100 160 155 150 145 140 135 130 +7.8% YOY year-to-date thru June 125 2006 2007 2008 2009 2010 2011 Source: CPB Netherlands Bureau for Economic Policy Analysis 14
Trade Deepening Back on Track Recession Not the End of the Globalization Story 28% 26% 24% Merchandise Exports Share of World GDP (%) 26% 22% 20% 18% 16% 16% 14% 12% 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 est. Source: Economist Intelligence Unit / Haver Analytics 15
Emerging Markets Will Continue to Lead, and APAC is the Growth Engine 7 Annualized GDP Growth 2010-2015 6 Emerging Markets annualized growth % 5 4 3 2 Developed Markets 1 0 North America EMEA LAC APAC Emerging Asia Source: FedEx Corporate Economics, EIU 16
Emerging Market GDP to Overtake Developed Economies on a Purchasing Power Parity Basis 70 Developed vs. Emerging Markets % of Global GDP 70 65 Forecast 65 % of World GDP (PPP basis) 60 55 50 45 40 Advanced Economies Emerging Economies 60 55 50 45 40 35 35 30 1980 1985 1990 1995 2000 2005 2010 2015 30 Source: International Monetary Fund 17
Challenges and Uncertainties Going Forward Regulatory uncertainty European sovereign debt crisis Soft landings in the emerging markets Commodity prices Geopolitical uncertainties 18