Gains in FedEx Corp.’s overnight box shipments in the U.S. reinforce the Federal Reserve’s view that the economic expansion is on a “firmer footing.”
Average daily volume rose 2.4 percent to 1.22 million boxes in the quarter ended Feb. 28 from a year earlier, the second-largest U.S. package-shipping company reported today. It was the highest level of such shipments for a fiscal third quarter since 2006.
“FedEx’s overnight box volume is one of the most reliable indicators of the state of the economy” because the speed of shipments indicates demand is picking up, said Charles Clowdis, managing director of transportation advisory services at IHS Global Insight, a forecasting firm in Lexington, Massachusetts. “Increased volumes certainly validate a steady recovery.”
Goods moved by the Memphis-based company account for at least 5 percent of U.S. gross domestic product, with box shipments reflecting everything from auto parts to consumer purchases over the Internet, said Kevin Sterling, an analyst in Richmond, Virginia, at BB&T Capital Markets.
The Federal Open Market Committee this week said “the economic recovery is on a firmer footing” as consumer and business spending “continue to expand.” Policy makers also affirmed plans to buy $600 billion of Treasury securities through June.
At their prior meeting in January, central bankers raised their projections for economic growth this year to 3.4 percent to 3.9 percent, compared with November’s forecasts of 3 percent to 3.6 percent.
Chairman Ben S. Bernanke this month told the Senate Banking Committee that “we have seen increased evidence that a self-sustaining recovery in consumer and business spending may be taking hold.”
The Fed said in its Beige Book survey of its 12 regional banks two weeks ago that “overall economic activity continued to expand at a modest to moderate pace” early this year and “all districts, except St. Louis, experienced solid growth in manufacturing production.”
FedEx forecast a profit for its fiscal fourth quarter that topped analysts’ estimates.
“Our businesses are performing strongly in the United States where industrial production growth is expected to approach nearly 5 percent in calendar 2011, outpacing GDP and supporting overall transportation volumes,” Fred Smith, FedEx chairman and chief executive officer, said today in a conference call.
Manufacturing output rose 0.4 percent in February following a 0.9 percent gain the prior month that was three times as large as the initial estimate, a Fed report showed today.
FedEx customers include Internet retailers such as Amazon.com Inc. and manufacturers including Apple Inc., company officials said at the Goldman Sachs Global Industrials Conference last November. Under an agreement that runs through September 2013, FedEx Express provides domestic air transportation services to the U.S. Postal Service, according to its annual report.
“The overall economy is humming along and continues to improve,” said Sterling, who rates FedEx a “buy.”
“We will see further growth in the next several quarters,” he said. “Industrial production continues to be strong.”
FedEx stock rose 5.4 percent to $89.92 at 9:58 a.m. in New York trading. In February, the company cut its quarterly earnings forecast because of rising fuel prices and snowstorms that snarled operations.