Thread by @CathieDWood

Government statistics do not seem to be capturing how weak the economy is. Many companies are reporting shockingly weak revenues. UPS’s US delivery volume growth is worse today than in 2007-2009. After falling for nearly two years, it dropped another ~11% last quarter.

At first I thought that Amazon still was taking share and causing problems, but this chart suggests that market share has changed very little since 2020.

This week, another economic bellwether, 3M, reported that global organic sales dropped more than 3% year over year on a local currency basis last quarter. The services side of the economy is unlikely to escape the global monetary tightening that is gripping these companies.

In a strong third quarter report, Meta Platforms mentioned that Chinese advertising focused on consumers in the developed world was material to its 21% increase in constant currency revenues. We believe that, in response to domestic weakness, China is exporting deflation.

Also reporting this week, two life sciences companies that have managed earnings and delighted both the sell-side and the buy-side of the Street for years - Thermo Fisher and Danaher - hit air pockets and corroborated that China may not be the world’s growth engine any longer.

So, why is US employment still so strong, supporting the government’s point of view? In our view, labor hoarding after two years of vacancies is a reason on the demand side, while loss of purchasing power - especially food and energy - is a reason on the supply side, BUT…

…if we are right that prices are about to unravel and crush margins, then companies will be forced not only to lay off excess labor but also to harness AI and other automation to salvage margins. Innovation solves problems and gains traction during tough times!