The seasonally adjusted March FDI (44.4) experienced a sharp contraction (February 53) “as the COVID-19 pandemic and ensuing shutdowns took hold over the latter half of the month,” R.W. Baird analyst David Manthey wrote.

The seasonally adjusted sales index mirrored the deceleration seen in the overall survey, decreasing to 34.6 from 54.9.

The seasonally adjusted Forward Looking Index decreased to 33.3 (February 48.9), registering a record low for the index amid the uncertainty caused by COVID-19.

“This reflected a lower six-month outlook and employment levels that are below seasonal expectations,” Manthey wrote.   “Additionally, supply chain constraints continued to manifest as further respondents noted slower deliveries coming from suppliers.”

Hiring sentiment deteriorated during the month.

“Perhaps a sign of layoffs that have already occurred or are soon to occur in the fastener industry, the FDI employment index was significantly lower m/m, coming in at 27.0 vs. 48.2 in February,” Manthey wrote.

No respondent noted employment levels were higher than seasonal expectations, while 46% characterized employment as below expectations, the highest percentage recorded in survey history (since 2012).

Most respondents were hesitant to speculate on overall economic and business trends given the rapidly evolving economic environment.

“On the 30th of March, I believe there is much more to figure out before my response is more concrete,” one respondent stated.

Others see a significant short-term weakening in the economy but a return to normal levels shortly thereafter.

“Regarding the economic trend, the short term (30-60 days) I see receding and the long term (10-12 months) I see returning to where we were prior to Covid-19,” another respondent noted.

There is a clear consensus near-term expectation for lower activity levels, with 73% of respondents expecting lower activity over the next six months (February just 32%), while only 16% expect higher activity (compared to 50% last month) and another 11% expect similar activity (February 18%).

“This month we asked a supplemental question on the impact of the economic shutdown, US-China trade relations, and the potential for re-shoring of manufacturing to the US,” Manthey noted.

Nearly half of respondents (49%) expect economic trends will return or nearly return to previous levels, while 43% expect economic trends to deteriorate further. 51% of respondents believe the COVID-19 pandemic will lead to worse trade relations between the U.S. and China, while 24% do not anticipate a major impact on trade relations.

“Regarding the potential for re-shoring of manufacturing back to the US, 59% believe there will be some minor return of manufacturing, but only 3% anticipate a major return,” Manthey wrote.

“Lastly, 68% anticipate a minor shifting in sourcing away from China and another 11% expect a major shift away from sourcing from China.”

The FDI is a monthly survey of North American fastener distributors conducted by the FCH Sourcing Network, the National Fastener Distributors Association, and Baird.  Web: fdisurvey.com