7/10/2012 12:02:00 AM
NEWS BRIEFS
FDI: Fastener Demand and Confidence “Fading”
Impacting New Trade Lines ‘Hard’
“Grainger and MSC entered the fastener market in earnest several years ago.
“We asked respondents what impact the encroachment of these category killers has had. 63% of respondents still do not run into them often and another 16% run into them infrequently but expect them to become more prominent as they climb the learning curve.
“18% of respondents see them more often, but find them to be uncompetitive or good competitors. Just 3% feel they have messed up the market.
“It is hard to be impactful in new lines of trade.
“This is why we do not think Fastenal and Grainger getting into metalcutting will adversely affect MSC Industrial any time soon.”
The Fastener Distributor Index (FDI) “took a clear turn for the worse” in June, falling to 51.6 — down from the 56.3 the index recorded in May.
“This was led by Sales, which performed worse than expected with a reading of 42.2 (from 58.8 in May),” the FDI found. “This led to less robust Employment (growing, but at a decelerating rate for the third straight month).”
Respondents were more inclined to see their own inventories as “too high” and were less inclined to see their customers’ inventories as “too low.”
A growing number of distributors expressed rising pessimism for the coming months.
“We commented on the slow erosion of optimism in recent months. That became a mudslide in June.”
One in four respondents expect higher activity in six months (43% in May), vs. 38% that expect lower (10% in May).
“Through May those leaving the ‘Higher’ camp fled for the ‘Same’ category; in June, they flooded in to the ‘Lower’ section. Clearly, confidence is beginning to fail, in our view.”
Prices seem to be stagnating as well, with little “fresh pricing” in the opening half of 2012. While price cuts remain rare, respondents with positive annual gains are just 28.1% of the total.
“The annual rate of change in point-of-sale pricing moderated again, to up 1%–1.5%. Past hikes continue to anniversary with little in the way of new hikes coming through.”
If May’s data was “ambiguous,” the picture became clearer last month.
“The June FDI, when taken with other indicators, seems to clear things up a bit: demand and confidence seem to be fading.”
The FDI predicted weakening results for many distributors in June.
The FDI is a monthly survey of North American fastener distributors. As a diffusion index, readings above 50 signal strength and below 50 signal weakness.
The FDI is a joint production of BB&T Capital Markets and the FCH Sourcing Network, the online network for industrial fasteners. ©2012 GlobalFastenerNews.com
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