The Fastener Distributor Index (FDI) survey for August, 2024. The FDI rebounded to 53.8 in August after the previous months dismal 47.5 reading, seasonally adjusted. In contrast, the Forward Looking Indicator (FLI) dipped lower to 47.4, signaling growing concern over longer term market conditions.
Key Takeaway:
The seasonally adjusted Fastener Distributor Index (FDI) improved to 53.8 this month (July 47.5), mainly on a recovery from last month’s abysmal sales reading, much slower supplier deliveries, and slightly higher pricing. Conversely, this month’s Forward-Looking Indicator (FLI) decelerated m/m, dropping to 47.4, suggesting some weakening ahead. When taken together with other indicators (continued sub-50 ISM PMI in August, recent weak jobs report, weak FAST August sales, etc.), we believe fastener market conditions and the industrial economy in general continued to be soft but slightly better m/m in August.
Key Points:
FDI bounces higher m/m. The August seasonally adjusted FDI improved to a reading of 53.8 compared to July’s 47.5. Three of the four underlying components (sales, supplier deliveries, and customer inventories) drove the improvement; employment was flat m/m. Looking at the sales index specifically, this month saw a nice recovery from a very soft July. 35% of respondents indicated sales came in above seasonal expectations compared to just 22% last month and the 34% average over the past year. An equal amount of respondents said sales were in line with expectations (32% vs. 31% in July) or below expectations (also 32%, July 47%).
FLI moves further below 50. Despite the headline strength in the FDI, respondents seem to consider this month’s performance more of a short-term bump as evidenced by the move lower in the FLI. Compared to last month, the FLI decreased to 47.4 (July 49.6), which is the third consecutive m/m decline in the index and the second-lowest reading all year. Residing well below a neutral reading of 50.0, the FLI signals an expectation for contraction m/m in future market activity levels. Higher respondent and customer inventories coupled with a less positive six-month outlook drove the contraction in the FLI. On the outlook specifically, views again leaned net more positive than negative (32% expecting higher activity levels six months from now vs. today compared to 29% lower) but the enthusiasm gap continues to narrow (May/June had a 24% net more optimistic outlook, July was 7% net optimistic). The remaining 39% of participants forecast similar activity. In July, 38% expected higher activity, 31% similar, and 31% lower. This drove the six-month outlook index to weaken to just 51.6 from 53.1 last month.
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Fastener News Desk encourages all North American fastener distributors to take part in the FDI Monthly Survey.
If you are interested in being a more active part of the fastener industry, you can apply to add your company to the FDI survey group. Complete the Request an Invitation to Participate” form by clicking here. Once verified, you will receive login ID and password information and you will be notified by email every month when the survey period has been opened.
About the Fastener Distributor Index (FDI).
The Fastener Distributor Index (FDI) was developed as a service to the fastener industry by the FCH Sourcing Network in 2012 to be a new benchmark for the fastener industry. The FDI is a monthly survey of North American fastener distributors, conducted with the FCH Sourcing Network and Baird. It offers insights into current fastener industry trends/outlooks. Similarly, the Forward-Looking Indicator (FLI) is based on a weighted average of four forward-looking inputs from the FDI survey. This indicator is designed to provide directional perspective on future expectations for fastener market conditions. As diffusion indexes, values above 50.0 signal strength, while readings below 50.0 signal weakness. Over time, results should be directly relevant to Fastenal (FAST) and broadly relevant to other industrial distributors such as W.W. Grainger (GWW) and MSC Industrial (MSM).
The FDI Survey website is a resource than can be accessed by anyone, but it can only be updated by registered users during the monthly open survey period, which occurs during the last week of each month.
Listen to episode 204 of Fully Threaded Radio for further commentary.
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