The Fastener Distributor Index (FDI) survey for January 2025 dipped to 47.6, continuing its softer course after reading 48.1 in December, seasonally adjusted. The Forward Looking Indicator (FLI) also dropped, coming in at 49.9.
Key Takeaway:
The seasonally adjusted Fastener Distributor Index (FDI) moved slightly lower and remained below 50 at 47.6 amid a slow start to the month (likely holiday/weather impacted), which drove seasonally weak sales. The Forward-Looking Indicator (FLI) also inched lower m/m to 49.9. Overall, it was a bit of a soft start to the new year. We attribute this more to January abnormalities and tariff skittishness than true underlying weakness. As such, we caution against reading too much into the January FDI.
Key Points:
FDI moderates amid slow start to the month. The January seasonally adjusted FDI decreased to 47.6 from December’s 48.1. We attribute this primarily to a weak sales index amid a slow start to the month (New Years fell on Wednesday this year prompting some to take extended shutdowns) and unfavorable weather. Publicly traded industrial distributors (Applied Industrial, Fastenal, and Grainger) have all recently made similar commentary about sluggish sales trends through mid-January before seeing acceleration in the back half of the month; at least one participant in the FDI echoed this in their commentary. Among FDI participants, only 27% of respondents indicated sales came in above seasonal expectations this month, which is below the 34% average registered throughout 2024. Employment remained mostly stable, with a full 63% of responses saying employment levels were similar m/m. Similarly, pricing looked stable with December (73% of responses).
FLI also retrenches; sentiment likely influenced by tariffs. The FLI retreated below 50 for the first time since August, coming in at 49.9 (December 51.4). Based on respondent commentary and a slightly weaker six-month outlook, we believe tariff headlines likely pressured sentiment and the FLI. Consistent with this, 50% of participants forecast better activity levels over the next six months vs. today – down vs. 61% last month. Another 33% see similar trends continuing (up vs. 24% in December), while 17% forecast deteriorating sales (vs. 15% last month). Still, sentiment leans net optimistic, and the FLI had been on a mostly upward trend since August. Thus, we believe that, although some caution persists due to ongoing macroeconomic/inflation/tariff uncertainties, overall sentiment among participants continues to lean cautiously optimistic on the 2025 outlook overall. Indeed, the six-month outlook index continues to be quite healthy at 66.7, which, although down from 72.7 in December, still represented the second highest reading since August 2021. With the ISM PMI downcycle of 26 consecutive months of a sub-50 reading also coming to an end in January, the potential for additional Fed rate cuts ahead, and industrial sentiment improving postelection, we continue to consider a turn in conditions ahead to be a reasonable expectation. Commentary focused on soft January and tariff threat.
READ FULL REPORT: FDI_Report_January_2025
Listen to episode #211 of Fully Threaded Radio for further commentary and analysis.
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