The Fastener Distributor Index (FDI) survey for February, 2025 rallied back to 51.6 last month, after its softer 47.6 reading in January, seasonally adjusted. The Forward Looking Indicator (FLI) continued its slide, impacted by challenging news on tariffs, dipping to 47.3.
Key Takeaway:
The seasonally adjusted Fastener Distributor Index (FDI) rebounded off a weather/holiday-impacted January, reaching 51.6 in February and again signaling improvement in the fastener market. The Forward-Looking Indicator (FLI), however, was slightly lower m/m at 47.3 as tariff headlines continue to dominate the news cycle and pressure respondent sentiment. Overall, it remains a mixed but slightly improving fastener demand environment.
Key Points:
FDI sees slight m/m improvement and return to growth. The February seasonally adjusted FDI improved to 51.6 from January’s 47.6. January was very soft due to weather and holiday timing thus we view the m/m improvement as in part indicative of simple normalization. Consistent with this, 40% of respondents indicated sales came in above seasonal expectations this month, which is essentially in line with the 34% average registered over the past year but up nicely from just 27% in January and 15% in December. Employment remained steady, with a robust 84% of responses saying employment levels were similar month over month. One noticeable change vs. last month was an uptick in participants noting higher pricing m/m, with many indicating this was an attempt to get ahead of potential tariffs. Nearly half (48%) of respondents said pricing was higher vs. last month, which was up significantly from just 17% in January and the highest percentage across the FDI survey since May 2022.
FLI slightly worsens, as all eyes remain on tariffs. The FLI slipped further below 50 this month, coming in at 47.3 (January 49.9). Based on respondent commentary and a continued weakening in the six-month outlook, we believe tariff headlines remain the primary drag on sentiment and are pressuring the FLI. 44% of participants forecast better activity levels over the next six months vs. today – down vs. 50% last month and 61% in December. Another 24% see similar trends continuing (down vs. 33% in January), while 32% forecast deteriorating sales (vs. 17% last month). As such, sentiment is becoming more mixed, albeit still leaning slightly optimistic on balance (44% higher, 32% lower). Respondent commentary points to a modest but long-awaited demand rebound finally beginning to materialize, though tariffs are seen as a threat to eliminate this momentum. Indeed, the six-month outlook index, while still healthy at 56.0, is now down significantly from the very optimistic December reading (72.7). Still, with the ISM PMI downcycle of 26 consecutive months of a sub-50 reading coming to an end in January, and February also remaining above 50, the potential for additional Fed rate cuts ahead, and industrial market sentiment improving post-election, a favorable turn in demand conditions ahead remains a distinct possibility with any resolution on the tariff front.
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FDI_Report_February_2025
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