12/5/2012 2:12:00 PM
NEWS BRIEFS
FDI: November ‘Tougher Than October’
Cancel LIFO?
“Fiscal cliff negotiations have put eliminating LIFO back on the table. This could generate a large tax bill as LIFO reserves move to the P&L, and we were curious how that would be viewed by distributors.”
“(About) 70% of respondents used FIFO and would not be affected. 16% saw it as a hassle but unlikely to alter their behavior.”
“We have been surprised at the lack of industry consolidation, and thought such a change may catalyze more of that. It seems there is less urgency than we would have expected.”
BB&T Capital Markets’ Fastener Distributor Index softened in November, dropping to 46.1 from October’s 46.8 in what remains a “very sluggish environment.”
“Notably, while November worsened, respondent’s outlooks were no worse than stable and may have even improved a bit. We take this to mean the current period is being hurt by destocking and shutdowns but that these are viewed, rightly or wrongly, as having short shelf lives. It would seem to fit the narrative of a lull followed by reacceleration in 2013. The most worrisome element of the report was pricing, which is looking still softer.”
Sales dropped from 48.6 in October to 34.4, registering the second worst reading of 2012.
“It is hard to say what blend of factors drove this: destocking, lengthy plant shutdowns, fallout from Hurricane Sandy, etc. But it is pretty clear that November was tougher than October.”
Still, the six-month outlook remained strengthened, with 47% of respondents anticipating higher activity six months out, compared with 34% in October.
Pricing was labeled the “troubling metric” of the survey.
“Sequential pricing was a bit softer (second time in three months) while annual pricing eased to its smallest gain of the year. Indeed, we now consider year-to-year price to be basically “flattish” and something warranting close tracking.”
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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