The seasonally adjusted January FDI (52.7) declined versus December (56.2), hitting a 14-month low. 

“While most metrics improved, historical seasonality would imply greater improvement would have been expected, which resulted in the overall FDI index cooling further from December’s pace,” according to R.W. Baird analyst David Manthey. “Commentary indicates fatigue/frustration could be settling in amid material shortages, lengthy supplier deliveries and extended lead times.”

The seasonally adjusted Forward Looking Index declined to 62.8. 

“The FLI has been on a gradual downward descent since June 2021 as supply chain issues, inflationary concerns and labor challenges have led to less-rosy forecasts of future activity,” Manthey writes.

The FLI received benefit from a higher employment reading, but this was more than offset by headwinds from higher customer inventories and a lower six-month outlook.

“Regarding the six-month outlook, a majority of respondents (67%) again indicated this month that they see similar or weaker activity levels over the next six months compared to today vs. ~72% on average expecting higher activity levels back in 1H21,” Manthey writes. “However, with continued strong demand/backlog and lengthy lead times, we believe this means the FDI could remain in solid growth mode for quite some time.”

The employment index edged up to 55 compared to 54.7 last month. 

“There were no comments on labor shortages this month – contrasting with a significant number of comments in November’s report. The fairly modest overall index level undoubtedly still indicates labor shortages are a challenge in the fastener market.”

Despite consistent supply chain constraints, demand has generally remained robust, with commentary suggesting for the first time that this could be impacting customer sentiment or new project decisions. 

“Customers’ schedules remain erratic due to various material shortages,” one respondent said. “Suppliers’ deliveries and lead times remain an impediment to sales growth and new program start-ups.” 

Another participant commented: “Customers are busy and fatigued. They are having a hard time keeping up.”

This month’s special supplemental questions from FCH focused on blockchain technology. 93% of respondents do not feel their understanding of blockchain technology is adequate to evaluate its potential impact on their businesses. Just 14% of respondents are utilizing or planning to utilize blockchain-based systems in support of supply chain operations. Lastly, only 3% of respondents are aware of any customers or suppliers deploying blockchain based systems.

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