The seasonally adjusted Fastener Distributor Index (FDI) moved slightly higher at 48.1 but remains below 50, reflecting a significant retrenchment in the sales index (36.5 versus 48.9 in November). This month’s Forward-Looking Indicator (FLI) remained in expansionary levels, albeit inching lower m/m to 51.4. Overall, the FDI ended the year on a softer note for two consecutive months, contrasting with the improvement seen August through October. Still, with the FLI and outlook data pointing to improvement ahead into 2025, we caution against reading too much into November/December trends given holidays, weather etc.
Key Points:
FDI inches higher in December. The December seasonally adjusted FDI increased slightly to 48.1 from November’s 46.4. The drivers of this month’s moderation were a significant drop in sales (36.5 vs. 48.9) and employment (47.0 vs. 51.7), while improvement in supplier deliveries (56.1 vs. 46.7) and customer inventories (48.5 vs. 40.0) partially offset. Looking specifically at sales, only 15% of respondents indicated sales came in above seasonal expectations, which is below the 34% average throughout 2024 and 33% in November. This was also the lowest mark since July 2023. Employment remained mostly stable, with a full 76% of responses saying employment levels were similar m/m. Similarly, pricing looked mostly stable with November (70% of responses).
FLI ticks slightly lower but remains above 50. The FLI registered a 51.4 reading, creeping lower from November’s 52.3. With a reading above 50, we view the FLI as indicative of expectations among participants for slight acceleration coming into the new year. Consistent with this, 61% of participants forecast better activity levels over the next six months vs. today, while just 15% see lower and another 24% forecast stable trends. Net, this is more optimistic on balance than in November when 43% forecast acceleration, 33% stable, and just 23% deceleration – albeit coming off a weak December. We believe his suggests that overall sentiment among participants leans cautiously optimistic heading into 2025, although some caution persists due to ongoing macroeconomic/inflation/rate uncertainties. This resulted in the six-month outlook index remaining quite robust at 72.7 (November 60.0), which is the highest reading since August 2021. Considering the current length of the ISM PMI down-cycle and persistently downbeat fastener market conditions for much of the past two years, future Fed rate cuts, and potential post-election acceleration with emphasis on domestic manufacturing, we consider a turn
in conditions ahead to be a reasonable expectation.
Outlook commentary leaned positive, albeit with a cautious eye towards tariffs. With the election behind us and ongoing discussions around tariffs, participants expressed varying expectations for the future. One respondent noted, “[It] appears things are ‘status quo’ now that the election and year are over. We don’t expect much in the way of overall business jumping but feel domestic manufacturing will benefit from all the latest tariff talks.” Others remain cautious about potential impacts on consumer demand and pricing adjustments: “We continue to be nervous about Trump’s new tariffs. They will affect everything. The higher they are, the worse the overall impact.” Nearer term, as is typically the case, the holiday season drove a significant slowing in activity towards the end of the month, with one respondent commenting, “RFQ’s slowed in much of December so we were unable to capitalize on as many orders as we had hoped to. Hopefully, the larger number of business days in January will help us balance it out.” Another said, “Early December sales were better than expected but slowed to expected levels as we hit the holidays.” A mid-week Christmas/New Years timing (as opposed to early/late in the week) may have contributed to the weakness, as well. Looking ahead, expectations for order activity remain stable, with potential increases in incoming purchases. As one respondent noted, “Expecting quoting activity to be the same, but incoming POs could be higher.” Still, cautious optimism seems to be the general tone on 2025 expectations: “2024 was a very strong year for us and we have higher expectations for the new year.” Echoing this, another participant commented, “2024 will be our second best behind 2022. Hoping 2025 brings good things for all.”
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FDI_Report_December_2024 (3)
Listen to Fully Threaded Radio episode #208 of Fully Threaded Radio for further commentary and analysis.
About the Fastener Distributor Index (FDI).
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. 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).
Please share the FDI with your fellow North American fastener distributors and encourage them to participate: Go to: www.fastenersclearinghouse.com/fch/main.nsf/fFastenerDistributorIndex
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