The seasonally adjusted August FDI (55.4) moderated from last month’s 59.6, reflecting “lower employment levels and a softer seasonally adjusted sales index (-7.7 m/m),” according to R.W. Baird analyst David Manthey. 

Pricing, however, continued to accelerate amid raw material inflation, inventory/labor shortages at the supplier level, and robust demand. This resulted in further improvement in the FDI Pricing month to month index. 

“In addition to extended lead times, labor shortages, and freight delays impacting respondents’ ability to meet orders, the ongoing semiconductor chip shortage continues to have negative impacts on demand (most likely in auto) for some respondents,” Manthey writes.

After four months of decline, the seasonally adjusted Forward Looking Index rose to 73 due to “extremely low (and weakening) customer inventory levels, which could be a positive for future demand, as well as a better six-month outlook,” according to Manthey. With the exception of the employment index, which continues to be impacted by labor shortages, all other FLI components (respondent inventory levels, customer inventory levels, and six-month outlook) improved in August. 

The FDI employment index declined to 53.8 from 61.3 last month. Just 19% of respondents saw employment levels as above seasonal expectations vs. July’s 26% as the job market remains extremely tight, “although the recent expiration of enhanced federal unemployment benefits could spur additional return to the labor force.”

Labor and logistics constraints continue to be respondents’ top concerns.

“Continued supply chain challenges due to port/rail congestion, raw material availability,” one respondent commented. “Labor remains scarce.” 

“In my 30+ years in the business I don’t think I have ever had such a difficult time meeting demand,” another noted. 

Lastly, semiconductor chip shortages also remain a headwind for some respondents: “With delay in imported material and computer chips our sales are down by as much as 15% and doesn’t look like it is going to improve anytime soon.” 

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