Source: Baird, FCH Sourcing Network, company reports

The seasonally-adjusted February Fastener Distributor Index (52.5) fell to the lowest reading since April 2017, “consistent with a weak January FLI reading,” according to R.W. Baird analyst David Manthey.

The sales index also decelerated as only 21% of respondents saw higher than seasonally expected sales in February.

“Positively, pricing stabilized on a m/m and y/y basis after deceleration was seen in January,” Manthey writes.

Customer inventory levels continue to be in line with expectations, while respondents’ inventories normalized from elevated levels in the channel last month.

The seasonally-adjusted Forward Looking Index was essentially unchanged vs. January (49.6 vs. 49.8 last month) but remained below 50 for the second straight month.

“While more bullish readings from respondent and customer inventories both drove slight improvements in the FLI, these were more than offset by a less bullish employment picture and a reduced six-month outlook.”

Looking back to the most recent time the FLI had two consecutive sub-50 readings (August/September 2016), the subsequent four FDI readings were all near or below a neutral level of 50. 

Manthey predicted that “stabilization or further moderation in the FDI could be more likely than acceleration from here.”

Hiring sentiment “cooled” in February as hiring was above seasonal expectations for fewer fastener distributors. The resulting FDI Employment Index moderated another 6 points sequentially.

Respondent commentary struck a more cautious tone in February as several respondents noted softening market conditions.

“Starting to slow down,” one respondent summarized.

Another commented: “Volume is down, but because of cost increases implemented last year, revenue is running about equal.”

Unfavorable weather conditions likely also negatively impacted results to an extent, one participant noted.

“I can understand the rest of the country being flat or slight growth; [I’m] wondering how the inclement weather affected sales.”

The six-month outlook “mostly points to stable activity levels anticipated by fastener distributors, with 24% of respondents expecting higher activity levels, 62% expecting similar activity, and 14% expecting lower activity.”

For context, the percentage of respondents expecting higher activity throughout 2018 was 49% on average, while the percentage expecting lower activity was 14%.

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

Source: Baird, FCH Sourcing Network, Institute for Supply Management